Page 11 - NorthAmOil Week 06 2021

NorthAmOil INVESTMENT NorthAmOil

Equinor to exit Bakken with

sale to Grayson Mill

NORTH DAKOTA NORWAY’S Equinor announced this week “We should not have made these invest-
that it had struck a deal to sell its assets in the ments,” Opedal told Bloomberg this week. The
Bakken play, which spans North Dakota and deals were struck when “higher oil prices were
Montana, to Grayson Mill Energy for around expected in the future, a high consumption of oil
$900mn. was expected”, but this is not how things turned
The deal covers all of Equinor’s acreage in out, he said.
the Bakken – both operated and non-operated Instead, Equinor has ended up writing down
– totalling 242,000 net acres (979 square km), as a total of $11.5bn on its US shale assets – $8bn in
well as associated midstream assets. The com- the Bakken and the remainder in the Eagle Ford
pany said its entitlement production from these shale in Texas, according to Opedal. It sold its
assets amounted to 48,000 barrels of oil equiva- Eagle Ford assets in 2019.
lent per day (boepd) net of royalty interests in the The Bakken region has a comparatively high
fourth quarter of 2020. per-barrel cost of production and investor pres-
“By divesting our Bakken position we are sure to exercise greater capital discipline has
realising proceeds that can be deployed towards been mounting for some time, intensifying fol-
more competitive assets in our portfolio, ena- lowing the advent of the coronavirus (COVID-
bling us to deliver increased value creation for 19) pandemic.
our shareholders,” commented Equinor’s presi- “The Bakken does not compete,” Opedal said.
dent and CEO, Anders Opedal. However, he said separately that Equinor was
Indeed, the sale comes after around 10 years happy with its remaining US operations.
of losses and pressure over what has come to be “We still have a good position in the Marcellus
perceived as a poor investment decision. Equinor and also in the US Gulf of Mexico,” Opedal was
– then known as Statoil – acquired its Bakken cited by Reuters as saying. “We will also focus on
acreage via its deal to buy Brigham Exploration our operations in Brazil and Britain, and seek to
for $4.4bn, which was struck in 2011. It has sub- improve our international business as operators
sequently come to regret the acquisition. or partners.”™

PERFORMANCE

Chesapeake emerges from bankruptcy

protection, shifts focus back to gas

US CHESAPEAKE Energy emerged from Chap- and the Haynesville play in Louisiana, while
ter 11 bankruptcy protection this week, with a allowing its oil output decline. Gas production is
business plan that will see the company shift its anticipated to increase modestly – if at all – over
focus back to natural gas. This comes after the the next two years.
company – once the second-largest gas producer The company is targeting average production
in the US – tried to pivot to oil in recent years in of around 427,000 barrels of oil equivalent per
an effort to pay down debt. Persistently low oil day (boepd) in 2021. It is also intending to rein-
prices constrained Chesapeake’s performance, vest 60-70% of its cash flow into production.
and last year’s downturn ultimately forced the “Shale has been marked by growth, and
company into bankruptcy protection. growth for all the wrong reasons,” Chesapeake’s
In January, Chesapeake’s plan, which elimi- CEO, Doug Lawler, told Bloomberg. “What
nated around $7.7bn in debt, was approved in we see going forward is a new era for shale,”
the US bankruptcy court. Then last week, the he said.
producer dismissed 220 workers – or 15% of its “We are no longer shackled to pursuing cash
workforce – and raised $1bn in new debt in order flow to service debt,” Lawler told the Financial
to complete its bankruptcy exit. Times separately. “It’s a fundamental reset of
It is now aiming to spend $700-750mn per the legacy obligations that impacted our perfor-
year on new projects that could generate $400mn mance in the past.”
in annual free cash flow (FCF). This year, the Chesapeake has also pledged to achieve net
company is planning to focus 85% of its spend- zero greenhouse gas (GHG) emissions by 2035
ing on the Marcellus shale in the US Northeast and to eliminate flaring of excess gas.™

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