Deals Of The Week: BP, Exxon Mobil, Total Make Major Moves

by: Evaluate Energy

This week, the Gulf of Mexico held its first land sale since the Horizon oil spill of April 2010. The Western Gulf of Mexico Lease Sale 218 reaped a total of $337 million, with 20 companies gaining tracts. Interestingly, BP (NYSE:BP) was successful in the sale, gaining 11 tracts for $27.5 million, despite its plethora of lawsuits following Horizon. The British major has seen fit to increase its position in the area, remaining the leading leaseholder as well as biggest producer in the Gulf. ConocoPhillips (NYSE:COP) was the most prominent among the successful bidders, gaining the most tracts (75 – spending $159 million), and also made the highest bid for 1 tract ($103 million). The tract in question is known as Keathley Canyon. This area was the most keenly contested of the entire sale, around $445 million was bid by 7 companies, with Chevron (NYSE:CVX)-owned Union Oil Company of California and BP the two closest rivals to Conoco’s bid, falling around $20 million short. Exxon Mobil (NYSE:XOM) also made significant purchases, spending $63.3 million on 50 tracts. Hess Corp (NYSE:HES) was the only bidding company to miss out.

Further south in Brazil, HRT Participações em Petróleo finalized the exercise of a call option to acquire a 45% interest in 21 Solimões Basin blocks from Petra Energia SA. This deal with Petra sees HRT paying around $770 million in installments over 5 years to Petra. TNK-BP International (OTC:TNKBF) will later farm-in to the 21 blocks in question, and gain this 45% interest for around $1 billion, a deal that was signed earlier in the year. Petra will also be entitled to 50% of the eventual difference between the value of this farm-in and the payment agreed with HRT this week. The exercising of the call option ends any conflict between HRT and Petra, removing a possible major obstacle to the mostly unexplored blocks, which cover around 12 million acres, being developed with the investment from the Russian TNK-BP.

Another Russian E&P company, Novatek, was also in the news this week, as Total (NYSE:TOT) upped its stake in the company by 2% for around $800 million. This deal follows the French major’s $4 billion acquisition of 12% in the company in Q2, and forms part of that arrangement; the intent of both parties was to increase the share to 15% within 12 months and to 19.40% within 36 months. The entire acquisition for the 14% interest so far averages out at approx. normalised values of $36,000 per boe/d of production and $2.91 per boe of 1P reserves.

In Kazakhstan, state-owned KazMunaiGas acquired a 10% interest in the giant Karachagamak field. The four partners in the field, BG, ENI, (NYSE:E) Lukoil (OTC:LUKOF) and Chevron, will all contribute a portion of this 10% respective to their own interests, and gain between them $3 billion before tax. The partners must however pay $1 billion in taxes, and also provide a $1 billion loan to the Kazakh NOC. The loan will be repaid over 3 years from KazMunaiGas’ share in the Karachagamak oil and gas production. The deal gives the Kazakh government influence in the only major project within its borders in which it did not already own a stake, as the country moves to gain more control over its natural resources. The dispute between the partners and the government over the field has lasted over a year, and now the field can finally move toward large-scale development following the settlement. The field has also now been assigned up to 2 million tonnes a year of additional capacity through the Caspian Pipeline Consortium’s pipeline.

Away from E&P, Anadarko Petroleum (NYSE:APC) agreed to sell its Red Desert Complex to Western Gas Partners LP. Western Gas will pay $483 million for the midstream assets in the Green River Basin, Wyoming, increasing its footprint in a key area and the company’s exposure to liquid-rich assets. The assets include 2 processing plants, with a combined capacity of 173 mcf/d, and nearly 1,300 miles of gathering lines.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.