Deals of the Week: INPEX to Partner With Shell on World’s First Floating LNG Project

The major deal for this week was INPEX’s purchase of a 17.5% interest in the Prelude FLNG project offshore Australia from Royal Dutch Shell. The terms of the deal were not disclosed by either party but the bulk of the benefit to Shell will be to have another partner to share the future development costs of the project that may total $12-13 billion. First production is not slated to begin until 2017 but it is anticipated this will be the world’s first Floating LNG project. In addition to the sharing of costs, Shell will also gain from having a partner with existing marketing operations in Japan, which is likely to be a significant end customer for the produced LNG. In partnering with Shell, INPEX will also gain experience from a world-leading LNG company, as it looks to develop projects around the world, most notably the Abadi Field FLNG project in Indonesia.

Although presumably smaller than the INPEX deal, Atlas Energy LP made the largest transaction where the acquisition cost was reported of $190 million. Atlas Energy LP will acquire 312 bcf of gas reserves in the Barnett shale from Carrizo, 57% of which are developed and have a reserve life index of 24 years based on current production. The Barnett shale play was a forerunner to the US shale gas industry’s rise to prominence over the past six years. Since this time however, as more liquids rich plays such as the Eagle Ford has been setting land price records, the Barnett shale resources have been steadily decreasing in value due to its remoteness from the main gas markets in the US and its lack of higher value liquids reserves. In this particular deal the acquisition cost equates to just $3.65 per proven boe ($0.61 per mcf).

BP revealed two deals in Namibia this week where it gained initial or increased stakes in 5 offshore blocks. The first deal involved BP farming into Serica Energy’s stake in 4 blocks which have yet to receive seismic mapping. BP will pay for an extensive 3D survey across the assets to gain an initial 30% interest which will rise to 67.5% should BP also opt to cover the cost of an exploration well. The second deal saw BP increase its stake by an additional 20% in block 2714A, which was part of its first foray into the country through a farm in with Chariot Oil and Gas. The interest is being acquired from Petrobras and the terms of the deal were undisclosed. The block contains the Nimrod “megastructure” which may contain 4.9 billion boe, and is due to be drilled in the second half of 2012.

In Canada, Crescent Point Energy continued its aggressive acquisition campaign of 2012 with the takeover of Reliable Energy for $99 million. The deal was announced on the same day that Crescent Point closed on the $625 million purchase of Wild Stream Exploration, and brings the company’s M&A expenditure during 2012 so far to $1.4 billion. The deal ties in closely with Crescent Point’s strategy of accumulating and developing land in the Bakken area of Saskatchewan, in which its vast experience in the shale resource gives them an operating advantage over other companies.

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