Monday, May 16, 2011

ConocoPhillips plans to sell Vietnam assets for $2-$2.5 billion.. Lot more parcels available as part of $5-$10 billion divestiture plan.

ConocoPhillips is planning to dispose of its holdings in the projects located in the South China Sea, said John McLemore, a company spokesman.
Conoco- Vietnam operations overview:
  • ConocoPhillips has a 23.3% interest in Block 15-1, and its activities are focused around three producing fields: Su Tu Den, Su Tu Den Northeast and Su Tu Vang; and two fields in development: Su Tu Trang and Su Tu Nau. First production on the Su Tu Den Northeast Field occurred in May 2010, averaging a net 4,000 barrels of oil per day and 4 million cubic feet per day of natural gas. Net production from the three producing fields averaged 18,000 barrels of oil per day in 2010.
  • ConocoPhillips has a 36% interest in the Rang Dong Field in Block 15-2. Net production in 2010 was 6,000 barrels per day of liquids and 12 million cubic feet per day of natural gas.
  • For transportation services, ConocoPhillips has a 16.3% interest in the Nam Con Son natural gas pipeline. This 244-mile transportation system links gas supplies from the Nam Con Son Basin to gas markets in southern Vietnam and has a capacity of 700 MMcf/d.

A value for the package
The assets put up for sale could be valued between $2-$2.5 billion, while the peers value the assets at about $1.5 billion. Rationale for the valuation is as follows-
  • Production of 26,000 boe/d is valued between ~$1.6-$1.8 billion ($60,000-$70,000/boe- based on the recent BP and TNK-BP deal in Vietnam with a premium factor applied);
  • A gas pipeline in general has lifetime of about 20 to 25 years. The Nam Con Son pipeline, which was put into service in 2002, is left with 9-16 years of service. Assuming the daily capacity to be approximately consistent at 700 MMcf/d, the 16.3% stake in the Nam Con Son pipeline is valued at ~$400-$700 million (at an average cost of $1,000/Mcf/d of gas pipeline capacity.)
NOTE: Average cost of $1,000/Mcf/d of gas pipeline capacity is sourced from the Midstream Database of Derrick Petroleum.

A brief look up at Conoco’s 2011-2012 divestiture program.
ConocoPhillips has planned for $5 billion to $10 billion in asset sales over 2011 and 2012 as it seeks cash to fund share buybacks and growth. ConocoPhillips sold about $7 billion in assets last year through a program announced in 2009 and intended in part to help reduce debt. The following table shows the divestitures of ConocoPhillips since 2010.

ConocoPhillips has now expanded the total sales target earlier this year to as much as $17 billion. “The company is marketing the assets in Vietnam as part of the divestiture program”, McLemore said in an e-mail yesterday. The following snapshot shows the exhaustive information collected by Derrick Petroleum on Conoco’s $5-$10 billion divestiture plan.

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