Neptune to buy Engie’s E&P assets
Friday, May 19, 2017
Neptune Energy, a private equity-backed start-up, is poised to become one of Europe’s biggest independent E&P players by purchasing a 70% stake in Engie’s Exploration & Production International (EPI) business.

Engie said on May 11 that it had received a “firm and binding” bid from Neptune and had opened talks over a potential deal.

The 4.7 billion euro (US$5.2 billion) offer would include 1.1 billion euros (US$1.2 billion) to cover Engie’s decommissioning liabilities, plus a contingent sum of 90 million euros (US$99.8 million) upon EPI meeting operational milestones.

Engie anticipates that the deal will close by early 2018 should negotiations with Neptune prove successful. The transaction would reduce Engie’s debt by 2.4 billion euros (US$2.6 billion), the French major said.

China Investment Corp. (CIC) currently holds the other 30% stake in EPI. Speculation had suggested that the Chinese fund could trade this for 49% in Neptune Energy. But Engie said only that Neptune would become “sole owner” of EPI, without expanding further.

Engie’s production portfolio yielded 148,000 boepd during 2016, and the division holds 672 million boe of 2P reserves across markets such as the North Sea, Indonesia and North Africa.

The firm’s CEO, Sam Laidlaw, formerly of Centrica, was quoted by the Financial Times as saying Engie’s portfolio was younger and more cost-efficient than similar acquisitions made in recent years.

Major stakes picked up by Neptune include a 35% operated interest at Touat in Algeria, which is expected to plateau with annual production of 4.6 bcm following first gas later this year.

Engie, however, will retain 30% in Touat, which will serve French markets via Algerian LNG terminals and has a wellhead cost of US$3 per million Btu, according to the Oxford Institute of Energy Studies (OIES).

The disposals are driving Engie towards its divestment goal of 15 billion euros (US$16.63 billion) by 2020, with the company saying it has now signed or closed 70% of the disposals. The funds raised will enable the firm to achieve its low-carbon energy expansion goals.

Engie’s investment strategy for 2016-18 earmarks 22 billion euros (US$24 billion) for clean technology, but the firm must be wary after losses of 4.6 billion euros (US$5.1 billion) and 400 million euros (US$443.8 million) for 2016 and 2017 respectively.

Engie’s green pivot mirrors those by other European integrated majors such as E.ON, which cashed out from its Norwegian and UK North Sea assets in 2015 and 2016.

By the end of this year, Denmark’s DONG is expected to offload its entire upstream portfolio to focus on offshore wind generation instead.

This NewsBase commentary is from our EurOil publication. To sign up for your free trial, click this link:

Read more NewsBase top stories via this link:

Find out more about European Oil and Gas from NewsBase