Labels

Friday, July 15, 2011

BHP Billiton acquires Petrohawk for ~$15 billion in the largest oil and gas M&A deal so far in 2011

BHP Billiton has agreed to acquire Petrohawk for US$38.75 per share by means of an all-cash tender offer for all of the issued and outstanding shares of Petrohawk, representing a total equity value of approximately US$12.1 billion and a total enterprise value of approximately US$15.1 billion, including the assumption of net debt.

Quick facts of the transaction:
  • Provides BHP Billiton with operated positions in the three world class resource plays of the Eagle Ford (332,000 net acres) and Haynesville shales (345,000 net acres), and the Permian Basin (325,000 net acres acquired in May 2011 for an average price of $1,400/acre).
  • Estimated 2011 net production of approximately 950 MMcfe/d.
  • Year-end 2010 proved reserves of 3.4 Tcfe and unproved resource base of 32 Tcfe for a total risked resource base of 35 Tcfe.
  • US$0.39 per Mcfe for total risked resources.


Valuation of the assets being acquired

A look at the split up of deal vale paid for the Haynesville, Eagle Ford and Permian assets-

  • The value for Haynesville Shale acreage is $3,622.5 million (at an assumed price of $10,500/Acre for 345,000 acres or $1.12/BOE of uproved resource potential);
  •  The value for Eagle Ford Shale acreage is $3,784.8 million (at an assumed price of $11,400/Acre for 332,000 acres or $1.78/BOE of unproved resource potential).  
  • The value for Permian basin acreage is $455 million (at $1,400/Acre for 325,000 acres based on the May 2011 transaction value);
  • Midstream assets are valued at $995 million as estimated by the buyer;
  • Remaining deal value of $6,242.7 million is ascribed to Proved Reserves ($11.04/BOE or $39,428/Daily BOE).

Benefits for BHP Billiton:

BHP’s acquisition of Petrohawk is the largest unconventional deal this year, the previous one happened when ExxonMobil bought XTO in 2009. This $15 billion deal has been followed by its recent entry into US shale business by acquiring Chesapeake’s Fayetteville assets for $4.8 billion. With these two back to back unconventional deals, BHP has set itself a strong foundation in unconventional business.

The following are the benefits for BHP through this acquisition.
  • The unconventional assets being acquired are well connected to a pipeline network which Petrohawk recently sold it to Kinder Morgan for $920 million. Therefore, distribution of the produced gas will not be an issue for BHP.
  • BHP’s acquisition of Fayetteville assets boosted its net reserves and resources by 45% and the current acquisition of Petrohawk takes BHP to a next level by doubling the resource base to 11.3 Billion BOE. BHP expects to increase its oil and gas production by 10% per year for the next decade.
  • BHP Billiton Petroleum will become one of the 10 largest independent upstream oil and gas companies in the world based on total resources.


Shale market is ROBUST
The unconventional market in US has seen a total deal volume of ~$33 billion since the beginning of this year against the last year volume of ~$17 billion with the same number of deal count. The following interactive charts show the unconventional deals in the past one year sorted by deal value and region.

By Deal Value 


By Region



Source Documents:

E&P Opportunities in North Africa

There are 20 opportunities recorded in Derrick’s “Deals in Play’” database for the region of North Africa comprising Algeria, Egypt, Morocco, Mauritania and Egypt.

Out of these 20, 12 opportunities are for stakes in exploration blocks previously awarded, 5 are opportunities relating to developing undeveloped discoveries, 1 is for a stake in a producing field and 1 is for stakes in multiple asset types (appraisal/pre-development discoveries & 1 producing field) (Map 1)


Figure 1: Map of North Africa with locations of opportunities shown by colored circles. Circles are colored based on the asset type. Place cursor over circles for additional information on the opportunity. Click on circles to get detailed opportunity break down (pop ups need to be allowed).

The maximum opportunities are in Morocco (8), followed by Tunisia (7), Egypt (3), Algeria (1) and Mauritania (1).

Derrick has valued the following packages (developing discoveries & producing fields) - (Table 1)
1. Dana Petroleum offers 25% in exploration concession offshore Egypt
2. Roc Oil to divest package of assets offshore Mauritania
3. Canamens Energy seeks farm-in partner(s) for two licenses offshore Morocco
4. Atlas Petroleum and Eurogas seek farm-in partner for Sfax permit, offshore Tunisia
5. Cooper Energy to farmout interest in offshore Tunisian field


Table 1: Derrick valued deals are shown with their asset types (transaction type), deal value and country. Squares are colored according to hydrocarbon type. Place cursor over squares for additional information on the opportunity. Click on circles to get detailed opportunity break down (pop ups need to be allowed), asset information and deal value.

North Africa presently accounts for 29% of total opportunities present in Africa

Uganda Oil and Gas Exploration in 2011 & 2012

Although the hunt for oil in Uganda dates back to the 1920’s, commercial discoveries have only been made in the last 5 years. The dominant player by far has been Tullow Oil which has had proven discoveries of a billion barrels with yet to be drilled (P50) estimates of another 1.5 billion barrels. The discovery of these significant reserves has ushered in a new chapter in Uganda’s development, and generated renewed interest in the petroleum potential in the country. Uganda has 10 exploration blocks that run from the Sudan border in the north through Lake Albert on the western border with Democratic Republic of Congo and south to Lake George.  However, only 5 blocks have been licensed. The other blocks are due to be licensed after the government completes a new regulatory framework over oil exploration. These blocks are Blocks 3B, 3C, 3D and 4A. The government has said it is planning a new licensing round later this year and is offering 5 blocks. 

Tullow initially planned to have first oil production by 2011, but tax disputes between the newly acquired Heritage Oil and the Ugandan government have led to a delay with first oil now expected to flow in 2012. The other 2 players who have been active are Tower Resources and Dominion Petroleum. However, these companies have so far been unsuccessful with limited drilling attempts.

The status of exploration activity in Uganda and exploration plans for 2011 and 2012 is looked at below. 
The following table is an extract from Derrick Petroleum Services “Exploration Database” which here shows limited information about exploration drilling in Uganda in 2011 and 2012. Further information on ownership and recent activity is provided below the table and map that follows. 

Block/ License Name
Operator
Status
Wells planned in 2011
Wells planned in 2012+
Date of last update
Block 3A
Tullow Oil
Announced

2
7/8/2011
Block 1
Tullow Oil
Announced
1
6/7/2011
Block 2
Tullow Oil
Ongoing
1

4/6/2011
Exploration Area 4B or EA4B
Dominion Petroleum Ltd
Ongoing

2
7/13/2011
Block EA5
Tower Resources Plc
Ongoing
1

5/18/2011
Source: Derrick Petroleum Services ‘Exploration Database’


Figure 1: Map of blocks and hydrocarbon fields in Uganda. Source: Heritage Oil & Gas. Note: All Heritage blocks in map have been acquired by Tullow Oil.

Block 3A
 Tullow Oil operates this block with 33.33% interest with partners CNOOC and Total also having 33.33% interest each. The Kingfisher-1 well was drilled in 2006 and subsequent appraisal has shown this to be a major field with the Kingfisher-3 well establishing 200 million barrels of recoverable reserves. 2 other prospects, the structurally attractive Pelican prospect and the large Crane prospect have been mapped on seismic and were announced to be drilled in 1H 2010. However, at the time of writing they are yet to be drilled, and pending further announcement it is likely that this will occur only in 2012.

Block 1/ Exploration Area 1 (EA1)
Tullow Oil also operates this block with 33.33% interest and with partners CNOOC and Total also having 33.33% interest each. Block 1 or Exploration Area 1 (EA1) is located at the northern end of Lake Albert, onshore Uganda and covers an area of 3659 sq kms. A successful 3 well drilling program (Warthog-1/Ngiri, Buffalo-1/Jobi-1 & Giraffe-1/Rii) was completed in 2008 unlocking a billion barrel potential in the Block. This was said to be the largest onshore oil discovery in Sub-Saharan Africa in over 20 years. This was followed by the drilling of the Ngiri-2 well in 2010. 2 wells were drilled in 2011, the Jobi-East-1 (to test the Jobi East prospect adjacent to the giant Jobi-Rii oil field )and Mpyo-3 appraisal well.

Jobi-East-1 discovered 20 metres of net hydrocarbon bearing reservoir.  Successful logging and sampling operations confirmed the presence of oil in two zones of high quality reservoir totalling 15 m of net pay. In addition, gas was also logged and sampled within sands totalling 5 m of net pay. The well was drilled by the OGEC RR600 and reached a total depth of 563 m. It has been suspended allowing for future re-entry to conduct production testing operations. An accelerated drilling campaign comprising up to four Jobi-East appraisal wells is planned for the second half of 2011 to assess the full extent of this important new oil accumulation.

The Mpyo-3 well intersected 21 m of oil bearing reservoir sands at a depth of 340 metres. The well was drilled 1.6 km southeast of Mpyo-1 in a down-dip location within a fault block adjacent to the Mpyo-1 discovery. Successful logging operations confirmed the sands to be of good quality and that they contained highly viscous oil similar to that encountered in Mpyo-1. The well was drilled by the OGEC IRI-750 to a total depth of 513 m and was suspended allowing for future re-entry to conduct production testing operations.
Pending further announcement, it is unlikely that any new exploration wells will be drilled on this block in 2H 2011. However upto 4 Jobi East appraisal wells are planned to be drilled in 2011.

Block 2/ Exploration Area 2 (EA2)
Tullow Oil also operates this block with 33.33% interest and with partners CNOOC and Total also having 33.33% interest each. Block 2 or Exploration Area 2 (EA 2) covers an area of about 3,900 sq km and is located on the eastern edge of Lake Albert of Butaiba region in Uganda. Tullow Oil has planned an eight-well program in Block 2 which commenced in March 2008. Out of the eight wells, two were drilled in 2008 and five were drilled from Q1-Q3 2009 with the last well expected to be drilled in late July 2009. Karuka-2 and Nsoga-1 exploration wells were drilled in Mar & May 2009 respectively. Nsoga-1 was a commercial discovery. Elsewhere in Block 2, Ngassa-2 was also drilled around the same time and in September 2009 it discovered oil. The well has been suspended as an oil producer. Kigogole-3 well was drilled in June 2009 and was suspended as a future producer. Wahrindi-1 was drilled in July 2009 and it encountered four meters of net oil pay. The last well, Ngara-1 was completed in August 2009 and was suspended as a future oil producer. According to Tullow, the Butiaba E&A prospect is scheduled to be drilled in 2011 on Blocks 1 and 2.

Block 5/ Exploration Area 5 (EA5)
Block EA5 is a 6,040 sq km license area situated at the northern end of the Albertine Graben in northern Uganda. The first exploration well, Iti-1 was completed in June 2009 and was found to be dry. The second well, Avivi-1 was spudded on February 13, 2010 and also failed to encounter hydrocarbons. Tower Resources operates the block with 100% interest although Global Petroleum, which funded most of the cost of Iti-1 and 25% of the cost of Avivi-1, has earned the option to take a 25% interest in the license. In May 2011, Tower Resources announced that a seismic survey is ready to begin so that a well can be drilled before the end of 2011.

Block 4B/ Exploration Area 4B (EA4B)
Exploration Area 4B or EA4B covers an area of 2,021 sq km in the Lake Edward and Lake George segment of the Albertine Graben. The adjacent basins, Southern and Northern Lake Albert and the Pakwach, have been the sites of several major oil discoveries, including those of the Kingfisher, Warthog and Buffalo-Giraffe (Jobi-Rii) fields. In November 2008, Dominion completed the acquisition of 371 kms of 2D seismic data onshore and 130 kms on Lake Edward. According to their July 2009 update, Dominion had identified four ready-to-drill prospects in this block which had an unrisked gross recoverable resource potential of 378 mmboe. The first exploration well Ngaji-1 was spudded on the block on June 21, 2010. However the well did not encounter any significant hydrocarbons in it. Dominion Petroleum operates the block with a 100% interest. As of July 2011, Dominion's current exploration efforts in this area are focused on two prospects: Prospect B, with 49.4 mmboe net prospective P50 resources; and the Izzy Prospect, with 83.7 mmboe net prospective P50 resources (management estimates). In 2011, Dominion intends to acquire 300-500 km of new 2D seismic in the Lake Edward Basin as well as carry out a surface geochemistry survey. It is assumed that the 2 prospects mentioned above will be drilled in 2012 after processing and interpretation of seismic and analysis of geochemistry data.



For more presentations on "Uganda", use our oil and gas document library:

1H-2011 Deal Watch. M&A deal flow reached $71 billion in 1H- 2011, down 20% compared to $88 billion in 1H-2010. Better results expected for full year 2011 with ~$50 billion worth of assets available for sale.

Quick Facts of 1H-2011 Vs 1H-2010
  • 1H-2011 global M&A deal flow settled at $70.554 bil lion with 758 transactions against the 1H-2010 M&A deal flow of $88.319 billion with 753 transactions.
  • Low M&A deal flow in 1H-2011 is attributed to the cancellation of the three significant deals worth $15 billion. The cancelled deals are- BP/Rosneft shares swap worth $7.8B; Novatek’s acquisition of 49% stake in Sibneftegaz for $1.3B; PetroChina/Encana Cutbank Ridge JV worth $5.5B
  • Split of Asset and Corporate transactions- 62%/38% against 2010 split of 68%/32%. Corporate transactions have relatively increased inspite of the cancellation of the two big corporate deals-BP/Rosneft and Novatek/Sibneftegaz
  • Conventional deal activity in US dropped to $9.5 billion (-113%) from 1H 2010 value of $20.3 billion, whereas unconventional activity remained the same with ~$17.5 billion.
  • Permian Basin and Eagle Ford Shale deals led the conventional and unconventional areas with 31% and 35%, respectively.

Top 10 deals of 1H-2011 (by deal value)



Active buyers of 2011

The study on the 2010 and 1H-2011 transactions says that Asian companies like CNOOC, PetroChina, Mitsui, KNOC and Marubeni are really keen on shelling out dollars on the North American shales. Looking ahead, Asian investors are expected to be the most active buyers in 2011, followed by the North American firms or other IOCs.

Deal activity by Country/Region in 1H-2011

United States:
United States has contributed the maximum or 39% of  the total deal volume. It is observed that many new comers including BHP made an entry into to the US Shale market. In addition, Eagle Ford acreage metric has reached a new benchmark level of $20,000-$24,000/acre.

Following are the significant deals in US in 1H-2011:
  • Chesapeake divests Fayetteville assets to BHP Billi ton for $4.8B
  • Marathon acquires additional Eagle Ford acreage from Hilcorp and KKR for $3.5B
  • KNOC and Anadarko form Eagle Ford JV ($1.6B)
  • Chesapeake and CNOOC form Niobrara JV ($1.3B)
  • SM Energy and Mitsui form Eagle Ford JV ($680M)
  • Marubeni acquires 30% interest in Marathon's Niobrara acreage for $270M
Quick look at the metrics in US

Canada:
Canada has contributed 10% of the total deal volume. It has been a busy year with respect to Montney shale formation. Much expected $5.4 billion deal of Petrochina acquiring 50% interest in Encana’s Cutbank Ridge assets was lapsed. However, Encana has again initiated a sale process regarding the same assets and few other unconventional assets in Canada.

Following are the significant deals in Canada in 1H-2011:
  • Petronas and Progress Energy form Montney JV for $1.1B
  • Talisman and Sasol expand Montney JV ($1B)
India
With very few deals, India has contributed 13% of the total deal volume. $7.2 billion alliance between BP and Reliance was the positive news for the entire E&P sector for India.

Following are the significant deals in India in 1H-2011:

  • BP acquires 30% interest in 23 blocks in India from Reliance for $7.2B
  • Petronas divests 14.9% stake in Cairn India to Vedanta and others for $2.1B

Africa:
Africa has contributed 12% of the total deal volume inspite of the political unrest that broke in the early 2011.

Following are the significant deals in Africa in 1H-2011:

  • IPIC acquires remaining 52.94% stake in Cepsa for $5B
  • Pioneer Natural Resources divests Tunisian assets to OMV for $866M
  • HRT O&G acquires UNX Energy for $726M
  • SPDC sells OML 30 to Conoil for $650M
  • SPDC sells 45% stake in OML 42 to Kulczyk Oil led consortium for $600M

2011 Outlook
Although, 1H-2011 deal volume is relatively low when compared to 1H-2010, it is expected that the 2H-2011 will make up the year with approximately $50 billion worth of assets available for sale. There are few significant packages available from Encana, ConocoPhillips, Chesapeake, Apache, Eni and Nexen. The following interactive chart shows the top ten Deals in Play.


Statistics of the upstream deals announced in 1H-2011
Click the table for enlarged view

Note: 1H-2011 M&A review is based on Derrick Petroleum Services’ Global E&P Transactions Database which includes information and analyses of all worldwide E&P transactions.

LinkWithin

Related Posts Plugin for WordPress, Blogger...