International merger and acquisition activity has gained pace in recent weeks, led in significance with BG Group PLC buying all the assets of Enron Oil & Gas India Ltd. (EOGIL) for $388 million.
Elsewhere in upstream news, the following transactions were announced:
- Australia's shale oil "twins" Southern Pacific Petroleum NL (SPP) and Central Pacific Minerals NL (CPM), both of Melbourne, agreed to merge.
- Premier Oil PLC, London, has formed a strategic partnership with Kuwait Foreign Petroleum Exploration Co. KSC (Kufpec) by selling it a 50% interest in its Pakistan joint venture with Royal Dutch/Shell Group for $105 million.
In midstream news, El Paso Energy Partners LP said it plans to acquire interests in two natural gas facilities from El Paso Corp. (EPC) and an- nounced a 20-year agreement to pro- cess natural gas for El Paso Field Ser- vices (EPFS). Total value of the deals is $284 million.
In service company news, Nabors Industries Inc.'s Canadian affiliate 19552 Yukon Inc. announced plans to acquire all common shares of Com- mand Drilling Corp., Calgary, for $3.30 (Can.)/share.
BG-Enron
The EOGIL assets include 30% of Tapti gas field and Panna-Mukta oil and gas field and a 62.64% interest in the CB-OS/1 exploration license, all off western India.
Enron had been trying to sell the assets for some time. Subject to numerous consents and conditions, including confirmation from JV partners of EOGIL's continuation as operator of the fields, executives expect the deal will be completed in a few weeks.
Equity production from the fields for the fiscal year ended Mar. 31 was 70 MMcfd of gas and 8,200 b/d of oil. As of that date, EOGIL had net proved and probable reserves of over 170 MMboe.
BG Group is acquiring the reserves at a cost of less than $2.30/boe. EOGIL has net assets of $419 million and, in the fiscal year ended Mar. 31, after-tax profit was $60 million on revenue of $160 million.
Further development of both Panna-Mukta and Tapti fields is expected over the next few years, subject to government and partner approvals.
Partners in Panna-Mukta and Tapti offshore operations are India's state-owned Oil & Natural Gas Corp. Ltd. 40% and Reliance Industries Ltd. 30%. Partners in the CB-OS/1 license are Hindustan Oil Exploration Co. 17.36%, Tata Petrodyne 10%, and ONGC 10%.
EOGIL has 200 employees based offshore at the fields; offices in Mumbai, New Delhi, and Baroda; and a supply base at Bhavnagar, which supports exploration, development, and production activities for the fields. Gas Author- ity of India Ltd. buys all gas output from the fields. Indian Oil Corp. buys oil production from the Panna-Mukta complex.
The deal does not include the Dab- hol power station in which Enron has a 65% stake. Other shareholders in Da hol are General Electric and Bechtel, each with 10%, and the Maharashtra State Electricity Board (MHSEB) with 15%. However, MHSEB is facing bankruptcy, which has forced the closure of the 740 Mw Dabhol station on the West Coast and shelved plans to expand it to 2,184 Mw.
Jeff Sherrick, president and CEO of Enron Global Exploration & Production, said the EOGIL sale would enable Enron to divest assets outside its wholesale and retail energy businesses.
Frank Chapman, BG CEO, said, "We see the building of gas markets in Guj- arat and Maharashtra states as an important stepping-stone in realizing our long-term goal of importing liquefied natural gas through our Pipavav project."
BG has been active in India for more than 10 years and is a part owner of two gas distribution companies, Gujarat Gas Co. Ltd. (65%) and Mahanagar Gas Ltd. (50%).
El Paso Energy Partners
El Paso Energy, which is 28% owned by EPC, agreed to buy the Chaco, NM, cryogenic natural gas processing plant from a consortium of financial institutions. That transaction includes the tolling agreement to process gas for EPFS.
In a separate deal, El Paso Energy also agreed to buy EPC's 50% stake in Deepwater Holdings LLC, a JV that owns natural gas pipelines in the western Gulf of Mexico.
Both transactions are expected to close in the fourth quarter.
"These transactions are a continuation of the midstream diversification strategy we initiated for El Paso Energy last year. We have now exceeded our objective of investing $500 million in accretive, fee-based acquisitions and high-return, organic-growth projects for 2001," said Robert G. Phillips, CEO of El Paso Energy.
SPP-CPM deal
SPP will be the surviving firm, owning 100% of the two companies' assets, including 17.3 billion bbl of oil shale resources in central coastal Queensland and a $300 million (Aus.) shale oil demonstration plant at Stuart.
Upon completion, CPM shareholders will get 2.664 SPP shares for each CPM share. The deal, subject to stockholder, court, and Treasury Ministry approvals, is expected to be finalized in January 2002.
The move will end CPM's cross shareholding in SPP, which was created in response to Australia's historical tax treatments regarding funding for oil, gas, and minerals exploration.
Campbell Anderson, chairman of SPP and CPM, said the firms effectively have operated as one company since the early 1970s with identical management and boards.
"This structure has complicated the analysis of the two companies by the market, and the proposed merger fully addresses this by resulting in one public company, SPP, with CPM effectively as its fully integrated subsidiary," Anderson said.
SPP and CPM will ask stockholders to approve a takeover protection mechanism limiting individual investors to 20% of the company for 2 years.
Trans Pacific Petroleum NL, the largest shareholder with 12.6% of SPP and 14.4% of CPM, has agreed to support the merger proposal.
Premier's JV with Kufpec
In May, Premier acquired Shell's 49.9% holding in Premier & Shell Pakistan BV in return for a portion of its holding in the Bhit development project and settlement of liability issues. PSP holds all of Premier's Pakistan properties.
In the latest transaction, Kufpec will also add Kufpec (Pakistan) Ltd. to the JV. That company holds a 15.79% interest in Kadanwari field. Kufpec is a wholly owned subsidiary of Kuwait Petroleum Corp.
Premier said the two transactions will allow it to realize significant cash from its portfolio and consolidate its assets with a focus on producing gas fields.
Premier also said it has sold its 40% operated interest in Ujung Pangkah field in Indonesia and related production-sharing contract to Amerada Hess Corp. for $30 million. Premier said that field is not core to its Indonesian business, which concentrates on gas ex- ports from the large West Natuna offshore gas project.
Amerada Hess said it expects to be named operator of the field, in which it previously held 36%. Other partners are Dana Petroleum PLC and Gulf Indo- nesia Resources Ltd., each holding 12%.
All these transactions are subject to regulatory approval. The Ujung Pangkah deal is also subject to Pertamina approval.
Nabors-Command Drilling transaction
Nabors, Houston, said its offer represented a 20% premium over Com- mand's Sept. 14 share price.
The land drilling contractor has entered into lockup agreements with shareholders and Command optionholders, giving Nabors control over 35% of Command's common shares.
Nabors said it will make the offer to the remaining shareholders "as soon as possible." The offer will be contingent on deposit of a minimum percentage of shares, removal of any "poison pill" impediments and regulatory approval.