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Osaka Gas lines up Texan shale deal
TEXAS
JAPAN’S Osaka Gas has struck a deal to buy the entirety of Sabine Oil & Gas, from its par- ent company Sabine Oil & Gas Holdings, for $610mn. e deal was announced on July 29. A number of Japanese companies have attempted deals in the US shale sector but most have ended badly. Osaka Gas also owns a stake in Freeport LNG.
Sabine’s shale gas holdings are seen as com- plementary to Osaka Gas’ Freeport LNG, which is also in Texas. Holding equity in the upstream will provide the Japanese company with upside should gas prices rise, acting as a hedge to its liq- uefaction exposure. Osaka Gas also has power generation assets in the US.
e shale company has around 175,000 net acres (708 square km) in east Texas in the Harri- son, Panola, Rusk, and Upshur counties. It pro- duces 210mn cubic feet (5.9mn cubic metres) per day from around 1,200 wells, with additional drilling options in the Haynesville and Cotton Valley formations.
Osaka Gas acquired a rst 35% stake in the acreage in Sabine’s eastern assets, which it bought in June 2018 for $146mn. Since this time, the Jap- anese company said these assets had been pro- ducing more than had been expected and, as a result, were generating stable cash ow. Osaka Gas went on to note it would integrate Sabine’s management and operational capacity into its own.
e Japanese company has a long-term plan, “Going forward, beyond borders 2030”, that puts overseas energy markets as one of its growth areas.
Sabine was established in 2006. It launched a competitive sales process with TenOaks Energy Advisors, with bids being submitted by the end of June.
Osaka Gas, with Chubu Electric, signed up to participate in the Freeport LNG project in Feb- ruary 2014. e two took a 25% stake in the rst train, with both companies committing to invest around $600mn.™
PERFORMANCE
Encana reports $336mn second-quarter profit
NORTH AMERICA
Encana continues to drive ef ciency gains with its four-rig Permian programme, which is focused on what the company calls cube development.
CANADA’S Encana has reported a $336mn pro t for the second quarter of 2019. e com- pany said it remained on track to meet its pro- duction and capital spending plan for 2019, though it has been able to reduce costs more than previously projected.
Encana narrowly beat analyst expectations for its quarterly earnings, buoyed by a 3.7% increase in oil prices, and higher production from the Permian and Anadarko basins in the US. e company’s output grew by 11% year on year in the quarter to 591,800 barrels of oil equiv- alent per day (boepd). Encana also achieved record crude and condensate production of 235,000 barrels per day (bpd).
The growth comes as Encana has been increasingly narrowing its focus on a small number of core regions. Encana’s core growth assets now only consist of its operations in the Permian and Anadarko basins, as well as the Montney shale play in Canada. It also holds assets in four other shale plays in the US and Canada, and is in the process of decommission- ing its conventional o shore Deep Panuke eld. Encana struck a deal to sell its assets in Oklaho- ma’s Arkoma Basin in July, and it also recently
announced it would exit China.
The $336mn in profit represents a turna-
round from a $151mn loss in the second quarter of 2018. e company’s second-quarter capital expenditure amounted to $750mn, which it said was in line with expectations at the start of the year for a “front-end loaded 2019 investment pro le”.
Encana’s second-quarter Permian pro- duction averaged a record 104,000 boepd, with liquids accounting for 84% of this. e company noted that it continued to drive e ciency gains with its four-rig programme, which is focused on what the company calls cube development.
The firm also reported record Anadarko Basin production, which reached 163,000 boepd. It attributed recent growth to a 31% rise in Sooner Trend, Anadarko Basin, Canadian and King sher Counties (STACK) oil output on the rst quarter of this year. Encana said oil and condensate now accounted for about 37% of Anadarko Basin production, averaging 60,000 bpd in the second quarter. It noted that it was boosting returns in the STACK through ongoing reductions in completed well costs.™
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