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Equatorial Guinea, Norway blocks depart Hess

Despite the current focus on onshore operations, offshore A&D activity is not dead. Hess (ticker: HES) recently announced two major offshore sales, totaling over $2.6 billion.

The first transaction, announced Monday, involves Hess interest in Equatorial Guinea. The company will transfer its properties to Kosmos Energy (ticker: KOS) and privately-held Trident Energy for a total consideration of $650 million. These properties consist of three exploration licenses directly offshore of Equatorial Guinea, and Hess’s interest in the Ceiba Field and Okume Complex.

According to Kosmos, these two fields had a combined 2 billion barrels of oil in place, 388 MMBO of which has been produced already. Based on oilfields with similar geology elsewhere in the world, there could be another 400 MMBO remaining to be produced, meaning the fields are only halfway through their lifetime, if estimates prove correct. Current production is 45 MBOEPD.

Kosmos and Trident will split the cost and ownership of the properties evenly, and both will contribute to running the fields. Kosmos will be primarily responsible for exploration and subsurface evaluation, while Trident will be responsible for production operations and optimization.

Hess Announces $2.6 Billion Offshore Asset Sales

Source: Kosmos

Norwegian interest sold for $2 billion, Denmark up next

The second transaction completed by Hess involves its properties in Norway, in the largest A&D transaction in the past two months. Norwegian Aker BP (ticker: AKERBP) will buy all Hess Norge, which owns interest in the Valhall and Hod fields, for a total of $2 billion.

Hess Announces $2.6 Billion Offshore Asset Sales

Source: Aker BP

Hess holds a 64.05% interest in Valhall and a 62.5% interest in Hod, which are producing a net 24 MBOEPD. According to Aker, the two plays had a combined 3.8 billion barrels of oil in place. One billion of these have already been produced, but there is the potential to produce at least 500 MMBOE more. The purchase of Hess’s interests will make Aker the sole owner of both fields, giving it control of development.

According to Aker, Valhall is currently partway through a drilling campaign, currently drilling well three out of seven. In addition, development of the western flank of Valhall is in progress. The current plan calls for a 12 well program tied back to existing infrastructure, with first oil expected in 2020. Further growth is possible in the south part of Valhall and in several parts of the Hod field.

Hess Announces $2.6 Billion Offshore Asset Sales

Source: Aker Bp

Hess has also begun the process to sell its interests in Denmark, which is expected to be completed in 2018.

$3.25 billion in 2017 divestitures will fund Guyana development

When added to its sale of Permian EOR projects in June, Hess has raised about $3.25 billion in cash proceeds this year. Some of the funds will go to paying down debt, but most will be spent in its primary project—offshore Guyana.

Discovered in 2015, the Liza field is one of the largest oil discoveries in the past decade. Hess has partnered with ExxonMobil (ticker: XOM) and CNOOC to bring the field to production. The companies announced FID on Phase 1 development in June, a project that will cost $4.4 billion. According to Hess, the block has about 2.5 billion BOE recoverable, with many more possible undiscovered plays.

Hess Announces $2.6 Billion Offshore Asset Sales

Source: Hess

According to Bloomberg, these sales will give up 16% of Hess’s total oil production volumes and almost a quarter of its earnings, meaning Hess is betting a significant amount of its current operations on the potential of the Liza field.

Fewer deepwater positions pushes up prices

According to IHS, offshore deal values are increasing as the deepwater inventory becomes tighter. Lower oil prices have pushed industry focus away from deepwater exploration, which means fewer discoveries are made. Even fewer assets are offered for sale, meaning the assets that do become available can command higher prices.

According to IHS, deepwater transactions see the highest valuations on a recoverable resource basis, with shallow water transactions also exceeding the overall average.

Hess Announces $2.6 Billion Offshore Asset Sales

Source: IHS


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