Anadarko shareholders go for the cash in USD38B Occidental buyout

MOSCOW (MRC) -- Shareholders of Anadarko Petroleum Corp voted overwhelmingly to sell the company for USD38 billion to rival Occidental Petroleum Corp , ending a short-lived contest that pitted two of the most storied names in the oil industry against one another, said Reuters.

Occidental in May beat out Chevron Corp to grab a major oil industry prize: Anadarko’s nearly quarter million acres in the Permian Basin, the top U.S. shale field, where low-cost output has helped turn the United States into the world’s top oil producer at more than 12 million barrels per day.

Anadarko’s shareholders voted 99% in favor of the deal that gives them USD72.34 per share based on Wednesday’s closing price for Occidental. Investors also voted in a non=binding measure 71% against executive payouts tied to the deal. Anadarko’s top six executives are to receive USD300 million in payouts.

Occidental said immediately after the vote it had closed the transaction, and had named new executives to run Western Midstream Partners LP, Anadarko’s natural gas pipeline business. Its shares rose 2.5% to close at USD47.13.

“We begin our work to integrate our two companies and unlock the significant value of this combination for shareholders,” Occidental Chief Executive Vicki Hollub said in a statement.

Anadarko shares are up 56% from the day before it disclosed merger talks, while Occidental shares are down 30% since its discussions were revealed.

The market’s sour response has dampened enthusiasm for deals. Even with stocks of many shale firms trading at multi-year lows, it may not be enough to spur a buyout spree by the world’s largest oil and gas firms, said Artem Abramov, analyst with Rystad Energy.

“Some super-majors might be waiting for even lower pricing,” Abramov said.

Hollub has been lining up financing and organizing asset sales to fund the deal while battling activist investor Carl Icahn, who wants to replace four Occidental directors and influence the pace of the company’s asset sales.

Hollub avoided her own shareholder vote on the deal by securing a controversial and pricey USD10 billion financing agreement with Warren Buffett’s Berkshire Hathaway. Icahn likened the deal to “taking candy from a baby” on Buffett’s part.

Occidental this week sold USD13 billion in bonds to help fund the Anadarko purchase and has proposed selling Anadarko’s Africa assets to Total SA.

It also formed a drilling partnership with Colombia’s state-run oil company Ecopetrol SA to develop part of its Permian shale field for up to USD1.5 billion.

Occidental last week reported a 14% drop in second quarter profit, as costs related to the deal and weaker chemical earnings hit its bottom line.
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MOSCOW (MRC) -- QEP Resources (QEP.N) will remain an independent oil and gas producer after ending a half-year process to sell itself without a deal, the company said, deciding instead to work with a rebuffed suitor to identify further cost savings, as per Reuters.

At the start of the year, Paul Singer’s USD38 billion hedge fund Elliott Management Corp, which owns 4.9% of QEP, offered USD2.07 billion for the Denver-based company, saying it was undervalued despite having good acreage in the Permian Basin, the largest U.S. shale oilfield.

Despite running a sale process aimed at soliciting other bids for the company, QEP said it had concluded “the best path to create superior value for our shareholders is to move forward as an independent company." Instead, QEP and Elliott have agreed to work together to identify two new QEP board members and create a five-person committee chaired by Chief Executive Tim Cutt to implement best practices and boost efficiency. The committee will include two current independent directors and the two new board members.

Elliott had been in talks with QEP’s board until very recently about buying the company, but they could not agree on a valuation, according to sources familiar with the matter. QEP is now worth half of what Elliott offered in January.

The hedge fund still believes QEP and its assets are undervalued and could return with a new proposal, one of the sources said.

QEP shares edged higher despite widespread declines in the sector following a 5% drop in WTI crude prices on Wednesday.

The gains were supported by QEP saying that it would reinstate its quarterly dividend of 2 cents per share. It cut its 2019 spending projection by about USD50 million, and raised its 2019 production forecast to between 29.9 million barrels of oil equivalent (boe) and 31 million boe, from 28.5 million boe and 30.3 million boe.

U.S. energy mergers and acquisitions have been tepid in 2019 as shareholders have pressured oil and gas companies to cut costs and return cash to them instead of expanding during a period of wild swings in crude and equity prices.

As well as reducing planned capital expenditure this year, QEP said it had slashed its general and administrative expenses by 50% compared with the first quarter.

The S&P Oil & Gas Exploration & Production index slipped on Tuesday below the level in February 2016, the trough of the last oil price slump.
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MOSCOW (MRC) -- Nigerian oil has suffered its slowest sales of the year in August, traders said, as U.S. exports of competing light, sweet grades flood traditional markets in Europe and Asia, said Hydrocarbonprocessing.

The changes illustrate how U.S. President Donald Trump’s strategy for “energy dominance” is reshaping oil markets worldwide, as U.S. oil exports surged 260,000 barrels per day in June to a monthly record of 3.16 million bpd.

Crude from Africa’s top exporter has largely been pushed out of the U.S. market in the last decade due to booming domestic output. Exports to the United States slid to zero for three weeks in July, the U.S. Energy Information Administration said.

But now shale oil from the U.S. Permian basin is pouring ever more into traditional strongholds for Nigerian oil in Western Europe, India and Indonesia.

Both Nigeria and the United States are big producers of the kind of light, sweet grades that are ideal for refining into gasoline.

According to IHS Markit, Europe has imported around 46% of Nigeria’s oil since the beginning of 2019, India nearly 18%, and the rest of Asia about another 10%.

“They’re facing bigger competition from the U.S., and in the last few weeks, U.S. exports have really picked up,” one major buyer of West African crude told Reuters.

As many as forty cargoes for export in August were still in need of buyers when Nigeria began publishing its preliminary programme for September exports beginning on Jul. 18.

It was the largest oversupply so far in 2019, with about 25 cargoes the monthly norm.

Though the excess has begun to clear, in part due to energy majors absorbing much of the excess into their own refining systems, the discounts sellers made to attract interest has lowered price expectations for Nigerian exports for September.

“They’ve got a big volume still remaining, and though the number of cargoes left for August is in the single digits, it seems to be taking longer and longer to clear lately. It’s not a pretty picture,” the crude buyer said.

A fire and explosion on June 21 which shut down the Philadelphia Energy Solutions (PES) refinery - a consistent buyer of Nigerian oil - only added to the marketing challenge.

Up to two month’s worth of light sweet oil, or about 20 million barrels, from West Africa and the North Sea which had been scheduled to arrive there were rerouted elsewhere at steep discounts, and prices have not since recovered in either region.

“Demand has been dire. (We) need margins to improve quickly and dramatically,” one seller of Nigerian oil said.

Traders said the competition for European demand was helping drive down offers for similar cargoes elsewhere.

“Imports of U.S. crude into Europe ... (are) obviously having an impact on sweet demand in other regions.”

Mele Kolo Kyari, the new managing director of the Nigerian National Petroleum Corporation (NNPC), assured Reuters in an interview this week that buyers would not soon lose interest.
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MOSCOW (MRC) -- Oil jumped more than 2% on Thursday on expectations that falling prices could lead to production cuts, coupled with a steadying of the yuan currency after a week of turmoil spurred by an escalation in U.S.-China trade tensions, said Reuters.

Brent crude ended the session up USD1.15, or 2.1%, at USD57.38 a barrel, after hitting a session high of USD58.01. U.S. West Texas Intermediate (WTI) crude futures rose USD1.45, or 2.8%, to settle at USD52.54 a barrel after hitting a peak of USD52.98.

Prices rebounded after tumbling nearly 5% to their lowest since January on Wednesday after data showed an unexpected build in U.S. crude stockpiles after nearly two months of decline. Lending some support to prices on Thursday, inventories at Cushing, Oklahoma, the delivery point for WTI, fell about 2.9 million barrels in the week to Aug. 6, said traders, citing data from market intelligence firm Genscape.

China’s yuan strengthened against the dollar and its exports unexpectedly returned to growth in July on improved global demand despite U.S. trade pressure. The dollar fell 0.2% against the offshore yuan. “Today’s price rebound across the energy spectrum looks like a normal correction from a short-term oversold technical condition,” Jim Ritterbusch of Ritterbusch and Associates said in a note.

“While some Saudi overtures of additional output restraint, a softening U.S. dollar and lift in global risk appetite are facilitating today’s rally, we are not viewing this as the beginning of a sustainable advance by any measure."

Reports that Saudi Arabia, the world’s biggest oil exporter, had called other producers to discuss the slide in crude prices have helped supported the market, traders and analysts said. “Saudis are scrambling to send a signal that will stabilize oil markets ... With energy prices heading for the worst weekly close since December, we should not be surprised to hear more rumors that OPEC may be considering increased production cut efforts ahead of a key summit that is tentatively planned for the second week in Abu Dhabi,” said Edward Moya, senior market analyst at OANDA in New York.

Persistent worries about demand growth have weighed on global oil markets, particularly as the world’s two biggest economies are locked in a trade row. Crude oil shipments into China, the world’s largest importer, in July rose 14% from a year earlier as new refineries ramped up purchases. Fuel exports continued to climb as supply outstripped demand in the world’s second-largest oil consumer.

Saudi Arabia plans to keep its crude oil exports below 7 million barrels per day in August and September despite strong demand from customers, to help drain global oil inventories and bring the market back to balance, a Saudi oil official said.

Geopolitical tensions over the safety of oil tankers passing through the Persian Gulf remained unresolved as Iran refused to release a British-flagged tanker it seized last month.

The U.S. Maritime Administration said U.S.-flagged commercial vessels should send their transit plans for the Strait of Hormuz and Gulf waters to U.S. and British naval authorities, and that crews should not forcibly resist any Iranian boarding party.
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MOSCOW (MRC) - Nigeria’s state oil company plans to partner with a private refinery under construction on the shores of Lagos to turn the oil-producing country into a fuel supplier for the region, the new boss said in an interview, said Reuters.

The aim to ink a contract with the Dangote refinery, with a capacity of 650,000 barrels per day (bpd), is part of new Managing Director Mele Kolo Kyari’s blueprint for transforming the Nigerian National Petroleum Corporation (NNPC) into a world-class state oil company. The refinery, being built by billionaire Aliko Dangote, is set to be Africa’s largest.

Kyari, who also intends to push for more transparency, said NNPC wants to be a “supplier of first resort” for the Dangote refinery. “Ultimately, it will be a contract to supply crude,” he said.

In his first interview with the international media since taking office last month, Kyari said he would publish the full list of those holding the nation’s crude oil contracts and the firms who won deals to swap Nigeria’s crude oil for products, along with audited accounts of NNPC’s books.

He said the openness, and a plan to improve commercial terms for oil companies, would spur investment that has been throttled by uncertainty and opacity. The contract lists have not been published for years, and NNPC has been dogged for decades by a reputation for corruption.

“We are going to do everything possible to make that open, the businesses open, so that people can actually predict what we’re going to do next,” Kyari said, adding that this would help to attract investment.

He said the contracts for swapping fuel would be published by the end of next week, though “clarifications” were needed before the crude oil contracts could be published. Industry sources told Reuters that those two-year contracts, awarded earlier this year, included close to 100 names.

NNPC is also pressing ahead with plans to revamp its own ailing refineries – despite a nameplate capacity at Dangote refinery that is well above Nigeria’s consumption. “It’s worth it,” Kyari said of NNPC’s refinery overhauls, adding that Nigeria could become a fuel supplier to the entire region. “Africa needs refining capacity,” he said.

While he said they are considering both government and private funding, after the revamps, third parties would maintain and operate the state-owned refineries to ensure reliable production.

Italy’s Maire Tecnimont (MTCM.MI) is already working on the Port Harcourt plant, and Italian refiner ENI (ENI.MI) is an adviser. The refineries have processed oil only sporadically for years, leaving the nation to import virtually all its own fuel needs.

Kyari said that some ambitious proposals, including selling down government stakes in upstream oil and gas joint-venture agreements and changing the way it pays NNPC’s portion of the bills owed under those deals, were on hold for now.

The government still intends to sell its stakes to less than 40%, Kyari said, but he noted that there was currently no framework in place for the sales. NNPC is in talks with all operating partners to improve commercial terms, but he said the long-delayed legislation to overhaul the oil sector, known as the petroleum industries bill, needed to pass quickly to spur investment.

“There are investment decisions that cannot be made now because the investors are wary of the fiscal environment,” he said. The mammoth bill, covering everything from fiscal terms to Niger Delta community engagement, has been in the works for over a decade. But Kyari said the current government, with the legislature controlled by the party of President Muhammadu Buhari, could pass it.

"This time around, you have the best alignment,” he said. “And I’m sure getting it passed will not be difficult."
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