U.S. Gulf of Mexico still a buyer’s market, Woodmac analyst says

The U.S. Gulf of Mexico is still a buyer’s market, an analyst by Wood Mackenzie has said following Equinor’s decision on Monday to beef up its stake in the Caesar Tonga offshore oil field.

As reported on Monday, Equinor said it had exercised its preferential rights to buy Shell’s 22.45% interest in the Caesar Tonga oil field in the U.S. Gulf of Mexico for $965 million, thwarting a deal previously agreed between Delek and Shell.

Namely, Equinor was already a partner in the Anadarko-operated oil field and had the preferential right to buy its Shell’s stake in the field. Equinor will pay $965 million for Shell’s 22.45% interest in the Caesar-Tonga oil field.

This will increase Equinor’s interest from 23.55% to 46.00%.  Anadarko remains the operator with a 33.75% interest, and Chevron retains its 20.25% interest.

A path to operatorship?

Commenting on the deal, Michael Murphy, research analyst with Wood Mackenzie’s Gulf of Mexico team, said: “This provides Equinor with a great opportunity to increase working interest in an asset it already knows well. The move increases Equinor’s US Gulf of Mexico 2019 net forecasted production by almost 15%, to over 100,000 barrels of oil equivalent per day.”

“The project will add near term cash flow to Equinor’s regional portfolio, and with the operator, Anadarko set to be acquired by Occidental, it could also position the company to seek operatorship of the subsea tie-back field in the future.”

He added: “Our initial analysis indicated that Delek achieved an attractive deal valuation – this is further proof that the US Gulf of Mexico is still a buyer’s market.”

Meanwhile, Delek on Tuesday released a statement confirming its agreement with Shell had fallen through. The company said that the deposit of $50 million that it had provided to Shell as part of the consideration for the transaction would be returned to its subsidiary.

First oil from the Caesar-Tonga field was produced in March 2012. Anadarko completed its eighth development well at the field in the second quarter of 2018. The well was tied back to the Constitution Spar and came online in the third quarter of 2018. Total average production at Caesar-Tonga is over 70,000 boe/d.

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