Page 9 - NorthAmOil Week 24 2021

NorthAmOil INVESTMENT NorthAmOil

Shell reportedly weighing Permian sale

PERMIAN BASIN ROYAL Dutch Shell is reportedly weighing a were identified as the Gulf of Mexico, Brazil, the
sale of some or all of its assets in the US’ Permian UK, Nigeria, Oman, Kazakhstan, Malaysia and
Basin. Brunei. Given Shell’s size, this illustrates how
Citing sources familiar with the mat- its upstream focus is narrowing – and now it is
ter, Reuters reported on June 13 that the possible that the number of core positions could
super-major was reviewing its holdings in the shrink further still.
basin, which accounted for roughly 6% of its Oil and gas production from Shell’s oper-
total oil and gas output last year. The assets ations in the Permian – including both oper-
could be worth more than $10bn, according ated and non-operated positions – averaged
to the sources. 193,000 barrels of oil equivalent per day in 2020,
There is no guarantee that a deal will be struck according to the company’s website. This marks
to sell the assets, the sources said. However, the a decrease from about 250,000 boepd the previ-
news comes less than a month after Shell was ous year.
ordered by a Dutch court to do more to cut its Analysts suggested this week that Cono-
greenhouse gas (GHG) emissions. While the coPhillips, Devon Energy, Chevron, EOG
company is planning to appeal against the rul- Resources and some private equity firms could
ing, it has also said it would deepen its planned be among the potential bidders for some or all of
emissions cuts, and against that backdrop, any Shell’s Permian assets.
move to sell oil and gas assets would come as no The super-major would not be the only major
great surprise. player in the Permian to shed assets there if it
Shell had previously identified the Permian as ends up selling any of them. Last week, Occiden-
one of nine core regions in its energy transition tal Petroleum agreed to sell some of its non-core
strategy to net-zero GHG emissions by 2050. Permian holdings to Colgate Energy for $508mn
However, it has struggled with profitability in as it works to reduce its debt load. (See NorthAm-
the basin. The company’s other core positions Oil Week 23)™

Northern Oil and Gas

bulks up in Permian

PERMIAN BASIN US-BASED Northern Oil and Gas announced including the Wolfcamp A, Wolfcamp B and the
this week that it had entered into three definitive first, second and third Bone Spring formations.
agreements to acquire non-operated interests “These assets represent the trifecta,” com-
across roughly 2,900 net acres (12 square km) mented Northern’s chief operating officer,
in New Mexico’s portion of the Permian Basin. Adam Dirlam. “We are acquiring high-return
The assets are being acquired for a combined core properties with top operators, assets with
purchase price of $102.2mn. significant inventory and growth potential, and
Northern said in a June 16 statement that the engaging in a transaction expected to meaning-
assets are primarily operated by Mewbourne fully impact Northern’s free cash flow profile.”
Oil, Colgate Energy, ConocoPhillips and EOG The company expects to fund the acquisition
Resources. In May, combined production from through a combination of a common equity
the assets was roughly 2,200 barrels of oil equiv- offering and – if necessary – cash on hand, or
alent per day, with oil comprising 66%. The com- borrowings under its senior secured credit
pany anticipates output to average 3,700 boepd facility. It said a portion of the transaction had
in the second half of 2021. Over the next few already closed, with the remainder due to close
years, Northern aims to grow production from in the third quarter of this year. It also updated its
the assets to roughly 6,500 boepd, assuming cur- capital expenditure guidance for 2021 to $215-
rent strip prices. 270mn, from $200-250mn previously.
Under this development scenario, Northern The acquisition comes as other companies are
anticipates the assets generating over $100mn also buying Permian assets. Last week, Occiden-
of cumulative free cash flow (FCF) between this tal Petroleum agreed to sell some of its non-core
year and 2025. Permian holdings to Colgate for $508mn. Days
The properties include5.3 net producing later, Reuters reported that Royal Dutch Shell
wells, 5.0 net wells in process and an additional was weighing a sale of some or all of its Permian
23.1 net undrilled locations ascribed to zones assets. (See previous story)™

Week 24 17•June•2021 www. NEWSBASE .com P9