Weekly Update: ExxonMobil replaces BP in arctic JV with Rosneft

Mark Young
Evaluate Energy

This week saw Rosneft potentially gain a new partner in the Kara Sea and Russian Arctic following the collapse of the BP agreement in May, after TNK-BP forced BP to cancel the deal through the courts. US giant ExxonMobil has stepped in with a total investment of $3.2 billion to gain a 33.3% interest in 4 blocks, in an area it says is among the most promising and least explored offshore areas in the world. 

The investment carries Rosneft for approximately $2.1 billion and provides the Russian company with a partner that is among the very few in the world who can drill in the challenging environment the Arctic represents. Rosneft can also expect to be offered interests in Gulf of Mexico and Texan properties, moving it forwards in its goal to become a major company on a global scale. 

There are potential stumbling blocks in both the US and Russia for the deal to overcome before it can complete, so the next few months promise to be an interesting time for both companies.

In a less headline-grabbing deal to happen this week, ExxonMobil also signed a farm-in agreement in another emerging resource play, the Vaca Muerta shale in the Neuquén basin of Argentina. The US company has moved to take a 45% interest in Americas Petrogas’ four ‘Los Toldos’ blocks, by committing to fund $53.9 million in the exploration phase, along with a further $22.4 million should the block reach the exploitation phase. This increases ExxonMobil’s interest in the basin to six blocks. 

The Vaca Muerta play is reportedly similar to the Eagle Ford and Haynesville plays in the US, so Americas Petrogas will doubtless profit from ExxonMobil’s experience and expertise via this agreement and take the lessons learned to its other interests in the basin.

In another shale-focused deal, the co-founder and chairman of Venoco, Inc, Timothy Marquez has moved to take the company private. Marquez is acquiring the 49.7% he does not already own, putting a lot of faith in the 214,000 acres the company owns in the emerging liquids-rich Monterey Shale play. 

The offer is substantial on the one hand at around $728 million, but on the other hand it is opportunistic. The offer of $12.50 per share represents a premium of 39% on the day-prior share price, but the price has fallen from much higher levels of around $14 only a month previously. Having said that, the deal seems to give the shareholders a fair price for current operations, with the reserve life multiple roughly equalling the operating cash flow multiple. To make any kind of gain on his $728 million outlay, Marquez is relying on Venoco’s assets in the Californian Monterey shale to bear fruit, even if he gaining this upside for free.

In another shale liquids deal, Canadian company Crescent Point Energy Corp. has agreed to acquire Bakken shale assets in North Dakota this week, having closed two deals that gives them light oil production from the formation and more than 78 net sections of land for a combined total of $168 million. The acreage is adjacent to its existing properties, and the acquisition cost is around $2,600 per acre, just over average for the play this year. 

Crescent Point has big plans for the new acreage; it has raised its 2011 capital expenditure guidance by $50 million and signed a two-year contract with a “leading US fracture stimulation company” with experience in the state.

Away from shale and E&P, Valero Energy signed a deal with Murphy Oil to acquire the 135,000 bpd Meraux refinery and related inventory in Louisiana for $625 million. Murphy is implementing its strategy to exit the refining sector, and this sale will be followed by further divestitures in the UK. For Valero, the deal will provide synergies; the company owns the St Charles refinery just 40 miles down the Mississippi River. The feedstocks and refined product blending at the Meraux refinery will be integrated with the St Charles refinery with its new 60,000 bpd hydrocracker, creating a very promising picture for Valero.

Royal Dutch Shell also acted on an exit strategy this week, selling its interest in non-strategic Norwegian natural gas transport infrastructure joint venture Gassled to Infragas Norge AS, a unit of Canada's Public Sector Pension Investment Board. The deal represents another large amount to be spent this week, the total consideration being around $722 million, and it will allow Shell to give more focus to major growth projects elsewhere. Shell has also announced that its Norwegian plans have not been changed despite this agreement being in place.

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