Page 8 - NorthAmOil Week 32 2021

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Chesapeake returns to acquisitions
LOUISIANA
CHESAPEAKE Energy announced this week that it had struck a deal to buy Haynesville shale player Vine Energy in a zero premium transac- tion valued at around $2.2bn. The news comes just months after Chesapeake emerged from Chapter 11 bankruptcy protection, which it had been forced into as a result of last year’s oil price downturn.
The company has sought to highlight that it is taking a different approach to acquisitions since its emergence from bankruptcy.
“We will not break the balance sheet,” Chesa- peake’s board chairman and interim CEO, Mike Wichterich, was quoted by the Financial Times as saying. “We are not the old Chesapeake.” He also told the newspaper that all of the compa- ny’s Haynesville output would be responsibly sourced gas (RSG), which is independently certi- fied as being in accordance with certain environ- mental, social and governance (ESG) standards.
In separate comments to Reuters, Wichterich described the company’s balance sheet as now being “super-stable”.
The deal will more than double Chesapeake’s gas output from the Haynesville play, which ben- efits from its proximity to the US Gulf Coast – a
booming LNG export hub. Vine’s assets include what Chesapeake described as 370 premium locations with a 50% rate of return at gas prices of $2.50 per million British thermal units ($69.15 per 1,000 cubic metres).
The company said it anticipated achieving around $50mn in average annual savings from operating and capital synergies stemming from the transaction. It also expects the deal to lower its gathering, processing and transportation (GP&T) expenses by roughly 15% while diver- sifying its midstream partnerships.
However, the acquisition will add $1.07bn in long-term debt, doubling Chesapeake’s debt load months after the company eliminated $7bn worth of obligations through its restructuring during bankruptcy.
Private equity firm Blackstone, which con- trols about 70% of Vine’s shares, will become one of Chesapeake’s largest stakeholders, owning just under 10% of the company’s outstanding shares.
News of the deal came a day after Chesapeake reported a net loss of $439mn for the second quarter of 2021 but raised its earnings and pro- duction expectations for the whole year, with no changes to its capital budget.™
BHP approves capex spending for Trion, Shenzi North projects
GULF OF MEXICO
AUSTRALIA’S BHP has approved plans to spend more than $800mn on work at two fields in the Gulf of Mexico: Trion and Shenzi North.
In a statement, BHP said that its board of directors had approved plans to allocate $258mn in capital expenditures at Trion, a deepwater field located off the coast of the Mexican state of Tamaulipas. These funds will be used to move the project into the front-end engineering and design (FEED) phase, it reported.
This decision clears the way for US-based McDermott International to begin implement- ing the FEED contract it won from BHP earlier in 2021. In turn, the statement said, the Austral- ian company will use the results of the FEED study to help decided whether to proceed with development work at Trion.
“The focus of these studies will be on com- pletion of the engineering, commercial arrange- ments and execution planning required to progress to a final investment decision [FID] from mid-calendar year 2022,” it explained.
Currently, BHP has a 60% stake in AE-0092 and AE-0093, the two blocks that encompass the Trion field, and also serves as operator of the project. The remaining 40% is held by Mexico’s
national oil company (NOC) Pemex.
The statement went on to say that BHP had approved the allocation of another $544mn in capital expenditures for Shenzi North, an unre- lated site in the US section of the Gulf of Mexico. This project represents the first phase of devel- opment work on the Greater Wildling project and will “take advantage of existing infrastruc- ture and production capacity in the nearby Shenzi production facility,” the company noted. The Australian company holds a 72% stake in the Shenzi field. The remaining 28% of equity is
owned by Repsol (Spain).
Geraldine Slattery, BHP’s president for
petroleum, hailed the progress made on both projects. “Both Shenzi North and Trion are strong growth assets for our business, provid- ing attractive returns from relatively low carbon intensity resources,” she said. “Shenzi North is aligned with the petroleum strategy to unlock and deliver further growth options in this key Gulf of Mexico heartland. This board decision also marks an important milestone in advancing the Trion development, as we continue to work with our partner Pemex towards a final invest- ment decision in calendar year 2022.”™
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w w w . N E W S B A S E . c o m Week 32 12•August•2021