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Chevron to gain Anadarko’s offshore Guyana oil assets after takeover

  • Stabroek News Sunday
  • 14 Apr 2019

Guyana could see oil exploration activity in the ultra-deepwater region picking up pace in the near future with United States oil giant Chevron set to buy Anadarko Petroleum Corp, which holds an exploration licence for the Roraima Block offshore Guyana.

As part of its crude and liquefied natural gas (LNG) push, Chevron on Friday entered a US$33 billion proposed buy over of Anadarko. Officials at Chevron told Stabroek News that when the deal closes, the Anadarko-owned Roraima Block would form a part of its assets.

“We expect the Anadarko acquisition to close during the second half of 2019. Until the transaction closes, it’s business as usual, and both Chevron and Anadarko will operate as separate companies. Assuming the transaction is completed, Anadarko’s licenses would transfer to Chevron following the necessary regulatory review,” Kent Robertson, Manager for Global External Affairs at Chevron, told Sunday Stabroek when contacted.

Efforts by this newspaper to contact head of the Department of Energy (DoE) Dr Mark Bynoe were unsuccessful.

However, government sources told this newspaper that Anadarko’s agreement with Chevron means that the latter company will acquire rights to the licence but the government would have to give consent.

That consent, a senior government official said, would “more than likely be recommended by the Department of Energy and given the blessings of President David Granger and his Cabinet.”

Another official explained that Guyana’s Petroleum Act and the agreement with Anadarko speak to them receiving the consent of government. “Generally, in law, we say that such consent ‘shall not be unreasonably withheld’,” the official explained.

Chevron is among nine companies that had previously expressed interest in acquiring the lone remaining ultra-deepwater 9,000 km² area offshore, called Block C.

Bynoe had previously said that while there has been “significant interest” in Block C, government was not “anxious to allocate Block C just yet until we have these complementary pieces in place…such as a model PSA, revision to the legislation and so forth.”

Bynoe had explained that the DoE is working to ensure that before new concession and licensing agreements are entered into, Guyana has a strong legislative framework.

Chevron’s proposed acquisition of Anadarko would, therefore, give the company a foot in the door here as it awaits government’s decision on Block C.

‘Definitive agreement’

On Friday, Chevron announced that it had entered into a “definitive agreement” with Anadarko to acquire all of the outstanding shares of the company in a stock and cash transaction valued at US$33 billion, or US$65 per share. The company said that the total enterprise value of the transaction is US$50 billion.

“The acquisition of Anadarko will significantly enhance Chevron’s already advantaged upstream portfolio and further strengthen its leading positions in large, attractive shale, deep-water and natural gas resource basins,” a statement from the oil major said.

Chevron’s Chairman and CEO Michael Wirth said that the “transaction builds strength on strength for Chevron.”

“The combination of Anadarko’s premier, highquality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our LNG business. It creates attractive growth opportunities in areas that play to Chevron’s operational strengths and underscores our commitment to short-cycle, higher-return investments,” he was quoted as saying.

“This transaction will unlock significant value for shareholders, generating anticipated annual runrate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close,” Wirth added.

Anadarko’s Chairman and CEO Al Walker, according to the statement, said that not only will the deal between the two form a stronger and better company with world-class assets, people and opportunities, but it will catapult the company to even greater highs. “I have tremendous respect for Mike and his leadership team and believe Chevron’s strategy, scale and operational capabilities will further accelerate the value of Anadarko’s assets,” he said.

The statement said that the acquisition consideration is structured as 75 per cent stock and 25 per cent cash, providing an overall value of US$65 per share based on the closing price of Chevron stock on April 11th, 2019. “In aggregate, upon closing of the transaction, Chevron will issue approximately 200 million shares of stock and pay approximately $8 billion in cash. Chevron will also assume estimated net debt of $15 billion. Total enterprise value of $50 billion includes the assumption of net debt and book value of non-controlling interest,” it said.

The statement added that the transaction has been approved by the Boards of Directors of both companies and is expected to close in the second half of the year but is subject to Anadarko shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.

Upon closing, the company will continue to be led by Wirth as Chairman and CEO. Chevron will remain headquartered in San Ramon, California.

‘Enhance portfolio’

Outlining the benefits of the deal, the statement said, “Anadarko’s assets will enhance Chevron’s portfolio across a diverse set of asset classes, including: Shale & Tight – The combination of the two companies will create a 75mile-wide corridor across the most attractive acreage in the Delaware basin, extending Chevron’s leading position as a producer in the Permian. Deepwater – The combination will enhance Chevron’s existing high-margin position in the deepwater Gulf of Mexico (GOM), where it is already a leading producer, and extend its deepwater

infrastructure network. LNG – Chevron will gain another world-class resource base in Mozambique to support growing LNG demand. Area 1 is a very cost-competitive and well-prepared greenfield project close to major markets.”

It also spoke of savings with synergies achieved, among other benefits.

Chevron’s acquisition of Anadarko will place it alongside another US oil major ExxonMobil in Guyana’s ultra-deep offshore oil area.

ExxonMobil, through its local subsidiary Esso Exploration and Production Guyana Limited (EEPGL), has made some 12 discoveries in just four years in the ultra-deepwater Stabroek Block and estimates its gross recoverable resource, of what it calls “light sweet crude,” to be approximately 5.5 billion oil-equivalent barrels.

The company continues exploration activity and only recently the Noble Tom Madden drillship commencing drilling at the latest well: Yellowtail-1. The Stabroek Block is some 6.6 million acres (26,800 km²).

Oil experts and analysts have listed both Guyana’s offshore and the Permian Basin areas as two global oil hot-spots.

Forced to stop work in 2013 because of the seizure of a research vessel carrying out studies in the Roraima Block by the Venezuelan navy, Anadarko had said in 2015 that it was still interested in drilling for oil here. When the government changed in 2015, and following ExxonMobil’s first discovery, a team from the company visited Guyana.

“The recent visit was…meant to inform Guyana that the company was still just as interested in developing the exploration blocks it has, and to receive an update on the ongoing Guyana/Venezuela controversy. Drilling is still a good way off. The company also supports Guyana’s efforts to finding a peaceful, definitive and permanent judicial solution (to the controversy),” Minister of Natural Resources, Raphael Trotman had said of the visit.

Government had said that the representatives were assured that the Guyana government will continue to take relevant measures to preserve the country’s sovereignty.

The US petroleum giant had its programme of exploration for offshore Guyana for 2013 abruptly halted on October 10, when a corvette from the Venezuelan Navy intercepted the seismic exploring vessel, MV Teknik Perdana and directed it to steam towards the Venezuelan island of Margarita. The MV Teknik Perdana was indirectly under contract with Anadarko to explore the Roraima Block with a view to determining whether commercial quantities of hydrocarbons existed.

According to one of the company’s corporate reports for 2013, it had planned 2D seismic surveys of the Roraima Block for that year. It said too that Guyana had proven oil producing areas in which multiple play types had been identified.

After the release of the vessel by Venezuela, talks between the foreign ministers of Guyana and Venezuela resulted in a decision to have the countries’ technical experts meet in four months to discuss maritime delimitation. They also reiterated that dialogue and cooperation are the means for a peaceful solution of differences between States. These talks were never held as Venezuela provided a list of excuses leaving Takuba Lodge with the view that there was never any intention to have any type of talks which could permit Anadarko to resume its work.

The government of Guyana’s agreement with Anadarko was held in abeyance following the 2013 incident. Guyana agreed that Anadarko’s agreement and licence would be “frozen” so that neither side would have to fulfil obligations.

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