Page 10 - NorthAmOil Week 41

NorthAmOil PERFORMANCE NorthAmOil
BP warns of impairment charge related to shale asset sale
US
SUPER-MAJOR BP has reported that it will record an impairment charge of up to $3bn after agreeing to sell a shale gas asset for less than it was valued on the company’s books.
BP said on October 11 that it would sell four packages of legacy gas assets from its US shale business, but did not disclose the buyer or the price. As a result of these deals, BP said it anticipated a non-cash, non-operating, after-tax charge of $2bn in its third-quarter earnings, which are due to be published later this month.
The sales form part of BP’s $10bn asset disposal programme, which the super-ma- jor is aiming to wrap up by the end of this year. The asset sale programme was launched after BP bought Australian miner BHP’s shale portfolio for $10.5bn last year. The super-major has already completed the majority of the asset sale programme, after agreeing in August to sell its Alaska assets for
$5.6bn to privately owned Hilcorp.
The programme is being completed ahead of schedule, having previously been planned to run until the end of 2020. BP said it would also continue to review asset valuations as sales in the US Lower 48 progress over the fourth quarter of
this year.
An RBC Capital Markets analyst, Biraj
Borkhataria, said the market for exploration and production asset sales was “difficult”, adding that he expected valuations to be depressed. “This is also confirmed by BP’s write-downs today,” he said.
BP also warned that its third-quarter pro- duction volumes would take a hit as a result of maintenance in some of its highest-margin areas, as well as downtime caused by Hurricane Barry in the US Gulf of Mexico. Together this is anticipated to result in a production drop of around 100,000 barrels of oil equivalent per day (boepd).™
PROJECTS & COMPANIES
Kinder Morgan starts up first Elba Island unit
GEORGIA
ELBA Liquefaction, a joint venture between Kinder Morgan and EIG Global Energy Part- ners, has brought the first unit at its Elba Island LNG project in the US state of Georgia online. The start-up – which has been pushed back sev- eral times over the course of this year – comes after a string of delays during the commission- ing process for the mid-scale liquefaction facil- ity. Most recently, the plant had to be evacuated as Hurricane Dorian approached the Georgia coast.
The $2bn project will consist of 10 mid-scale units in total, each with a capacity of 0.25mn tonnes per year (tpy), for a total capacity of 2.5mn tpy. The operator said in an October 4 statement that start-up activities were underway on the second and third units, while the com- missioning of the fourth, fifth and sixth units was ongoing. Construction of the remaining units is largely complete, it added.
The Elba Island terminal’s units were designed using Royal Dutch Shell’s Moveable Modular Liquefaction System (MMLS) small- scale LNG technology. They are designed for
quick assembly – mainly offsite – and disassem- bly in response to market conditions, and mark the largest deployment of the MMLS design to date.
Shell is also the project’s sole offtaker and is contracted to buy all of Elba Island LNG’s output over a 20-year period.
Elba Island LNG is the sixth and small- est LNG terminal to enter service in the US’ Lower 48 states in recent years. It has been estimated that it could take up to 100 days to fill a standard LNG cargo from a single Elba Island train.
The operator said it was earning around 70% of the expected total daily revenue of the liquefaction units now the first unit was in service.
Kinder Morgan owns 51% in the Elba Liq- uefaction joint venture, while EIG holds the remaining 49%. Under the joint venture agree- ment, Elba Liquefaction owns the liquefaction units and other ancillary equipment, while Kinder Morgan owns 100% of certain other facilities associated with the project.™
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w w w . N E W S B A S E . c o m Week 41 15•October•2019