Weekly Update: Gazprom and ENI reaffirm deal in Libya

Eoin Coyne
Evaluate Energy

Signs that Libya is returning to business as usual were indicated by Gazprom and ENI reaffirming a deal this week, which was put under doubt following the commencement of the Libyan civil war. The deal is composed of the acquisition by Gazprom of a 16.65% stake in the 100,000+ boe/d Elephant field. The original agreement reached in mid-February came in the same week that saw peaceful protests in Benghazi escalate into an uprising and the eventual withdrawal of virtually the whole of the country’s oil personnel. There was no mention in the latest announcement of the $163 million price being renegotiated down. It would have been understandable if Gazprom wished to change the terms of their offer given the fragile conditions that still exist, with Gaddafi still at large and a new unproven government gaining control.

The largest new deal of the week came from QR Energy, LP acquiring a portfolio of assets in the US for $577 million, from its sponsor Quantum Resources Fund. The assets are located in the Permian Basin, Ark-La-Tex and Mid Continent regions which will complement QR Energy’s existing assets. QR Energy, LP is a company that listed on the stock exchange barely one year ago and with this acquisition will see a doubling of its reserve base at a cost of $15.55 per proved boe. The assets acquired are 59% weighted towards gas, which in the current environment makes the acquisition metrics slightly above the typical US gas weighted acquisition. However, the terms of the consideration are compensated by the fact that the bulk of the acquisition is composed of preferred shares, issued at a par value 18% higher than the prior day’s common share price and at a coupon rate of just 4%.

Tourmaline Oil Corp., the Canadian intermediate company, announced the continuation of their aggressive acquisition program with $95 million of acquisitions during Q2 2011. The assets were gas weighted and acquired for less than $10 per proved & probable boe.

In Brazil, Gran Tierra farmed into two offshore blocks this week. The norm for farm in deals is for the smaller company to reduce their risk exposure by farming out an interest in an asset to a larger more capitalized company. In this instance however, Gran Tierra, a company with a market capitalization of $1.5 billion is farming into stakes from Petrobras and Statoil who have a combined market capitalisation of around $250 billion. Gran Tierra will take a 10% stake in BM-CAL-7 from Petrobras and a 15% stake in BM-CAL-10 from Statoil in return for paying past and future costs relative to their acquired interest.

There were a further five deals in Brazil as Barra Energia took a 20% stake in BS-4 in two deals from Chevron and Royal Dutch Shell for an undisclosed fee. OGX took a 50% stake in exploration block PN-T-102 and BP furthered their interests in two Brazilian companies involved in biodiesel and ethanol production. BP already had an interest in both companies but brought its stake in Tropical BioEnergia S.A. to 100% with the $71 million acquisition of the remaining 50% and took its stake in Companhia Nacional de Açúcar e Álcool to 99.97% with the acquisition of a further 3% for $25 million.

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