Oil and gas step up sales campaigns

Oil and gas buyers struggle with their own asset challenges due to the oil price languishing. Picture: Bloomberg

The owners of major oil and gas assets currently on the market are working hard to draw out infrastructure buyers as the competitions continue to gather pace.

It is understood that as Chevron moves forward with the sales process for its 16.67 per cent stake in the North West Shelf project in Western Australia, buyers are being told they have three options when it comes to making an acquisition.

With the sales process for the Australian portfolio of projects owned by Italian group Eni, meanwhile, adviser Citi is understood to be offering up the assets in two separate tranches.

It comes at a time when oil and gas buyers struggle with their own asset challenges due to the oil price languishing on the back of the global COVID-19 pandemic, while infrastructure funds continue to have plenty of money to put to work.

With respect to the Chevron sales process, the understanding is that Woodside Energy, which already owns a 16.67 per cent stake, is the most likely buyer, but the US oil major is doing its best to court infrastructure groups to create some competitive tension.

Some also hold a theory that Woodside may also buy Shell’s 16.67 per cent interest, tripling its exposure to the asset, but each stake is thought to be worth up to $5.8bn and so the cheque will probably be too large for the Australian energy player at that price.

Suitors have three options.

The first is acquiring the entire 16.67 per cent, which is the preferred option for Chevron.

The second is buying the asset with an agreement that Chevron underwrites the revenue for a certain period.

The third option, thought to be the least preferred, is a synthetic structure, where Chevron remains in the picture and a buyer acquires the revenue stream from the asset, without the problems of asset abandonment liabilities and other risks.

The challenge for Chevron selling the asset is that the project has not shored up its reserves beyond 10 years.

Another consideration is that a transaction is expected to be a lot of work for an infrastructure party, given that oil and gas assets are not typically among those they are familiar with.

So far, the parties that are said to have some interest in taking a look are GIP, IFM Investors and the Canada Pension Plan Investment Board, and first-round bids are thought to be due around the end of this month or early November.

With respect to the Eni sales process, parties can either bid for the entire portfolio or the Blacktip gas field project and the Yelcherr gas plant connected to the project separately, which are considered to be more suited to infrastructure players.

Known to be in the Citi-run contest so far is Morgan Stanley Infrastructure Partners with Cooper Energy, advised by Bank of America, Macquarie Group with Neptune Energy, which is backed by The Carlyle Group, and MedcoEnergi, advised by Barclays Capital.

It is understood that Medco is keen to partner with another suitor.

The entire portfolio is believed to be worth up to $1bn and final bids are due around November 19.

On offer by Eni as part of Project Ocean is a 10.99 per cent stake in Darwin LNG.

Analysts estimate it is worth about $250m.

Also up for sale is the linked Bayu-Undan gasfield project.

The Blacktip gasfield project and the Yelcherr gas plant connected to the project are expected to fetch up to $500m.

Eni is also selling a 72.2 per cent interest in the Evans Shoal and Barossa gasfield project off the coast of Darwin.