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Shell approves PowerNap tieback in deepwater Gulf
GULF OF MEXICO
PowerNap will be a subsea tieback to the Olympus production hub.
SHELL O shore, a subsidiary of Royal Dutch Shell, announced on August 1 that it had made a nal investment decision (FID) for the Power- Nap deepwater project in the US Gulf of Mexico. PowerNap will be a subsea tieback to the Olym- pus production hub, which is also operated by Shell.
e super-major said in a statement that Pow- erNap was due to start production in late 2021, producing up to 35,000 barrels of oil equiva- lent per day (boepd) at its peak. Recoverable reserves at the eld are estimated to be above 85 million boe. e project is expected to have a forward-looking breakeven price below $35 per barrel, and Shell did not report how much it is anticipated to cost. e super-major noted that as PowerNap was expected to be “multi-dec- ade producing”, the breakeven price projection would not be re ected in either earnings or cash ow in the next ve years.
Shell’s announcement comes as activity appears to be picking up slightly in the deep- water Gulf, which was hit hard by the oil price downturn. Indeed, Shell was one of the most active players in the region during the worst of
the slump, choosing to proceed with several new projects.
Subsea tiebacks have become an increasingly attractive option for operators seeking to reduce the costs of deepwater development, and this trend is continuing with PowerNap. e eld was discovered in 2014, and is 100% owned by Shell. It is located in the south-central Missis- sippi Canyon area, roughly 240km (150 miles) o shore New Orleans, in water depths of about 1,280 metres (4,200 feet).
e Olympus production hub entered pro- duction in 2014. Shell holds a 71.5% stake in Olympus, while BP Exploration and Produc- tion owns 28.5%. Output from PowerNap will be transported to market on the Mars pipe- line, which is operated by Shell Pipeline and co-owned by Shell Midstream Partners with 71.5% and BP Midstream Partners with 28.5%.
“PowerNap further strengthens Shell’s lead- ing position in the Gulf of Mexico,” said Shell’s upstream director, Wael Sawan. “It demonstrates the depth of our portfolio of deepwater growth options, and our ability to fully leverage our existing infrastructure to unlock value.”™
Occidental sells $13bn of bonds to fund Anadarko acquisition
US
Analysts are speculating that some of Anadarko’s US Gulf of Mexico assets could also be put up for sale following its takeover by Occidental.
OCCIDENTAL Petroleum has sold $13bn worth of bonds to help nance its $38bn acqui- sition of Anadarko Petroleum. The company received over $75bn in orders for the deal at the peak, which dropped down to $71bn as the deal launched, Bloomberg cited sources familiar with the matter as saying.
is was the highest amount of demand for a debt sale globally since state-owned Saudi Ara- mco received over $100bn in orders in April. e result is being welcomed as a sign that investors are willing to take risk again despite volatility in global markets, which has been exacerbated by rising US-China tensions.
Anadarko shareholders voted to approve the merger on August 8. Occidental avoided its own shareholder vote on the deal by securing a $10bn nancing agreement with Warren Bu ett’s Berk- shire Hathaway. is move allowed the company to raise the cash portion of its o er. But several Occidental investors, including billionaire activ- ist investor Carl Icahn, have opposed the deal. Indeed, Icahn has launched a proxy ght with
Occidental over the matter, calling for four members of the company’s board to be replaced. According to data compiled by Bloomberg, Occidental issued bonds to fund the Anadarko
takeover in 10 parts.
The company has also agreed to sell Ana-
darko assets in four African countries to France’s Total for $8.8bn. is will form part of a $10- 15bn asset sale plan that will help Occidental to pay down the considerable amount of debt it will take on because of the merger. Sources familiar with the matter also said in June that Occidental was seeking a buyer to take majority control of Anadarko’s Western Midstream Partners sub- sidiary – a pipeline operator. Analysts are also speculating that some of Anadarko’s US Gulf of Mexico assets – which may be worth at least $6bn in total – could also be put up for sale.
The takeover of Anadarko is the largest in the oil and gas industry since Royal Dutch Shell bought BG Group in 2016. Moody’s Investors Service has said it will add over $40bn of debt to Occidental’s capital structure from the outset.™
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