Delek Group has announced that it has signed an agreement to acquire 22.45% interest in the Caesar Tonga oilfield from Shell Offshore Inc., a subsidiary of Royal Dutch Shell plc, (‘Shell’). The field is one of the ten largest deepwater resources in the US Gulf of Mexico, with a production horizon spanning tens of years.
Delek Group will co-own the asset with 3 other leading oil and gas companies in the international energy market: Anadarko Petroleum (33.75%, and the field’s operator); Equinor (23.5%); and Chevron (20.25%). As part of the transaction, Delek Group will sign a long-term off-take agreement with a Shell affiliate (Shell Trading (US) Company) to purchase oil produced from the field for a period of 30 years at either market prices or prices matched to third party offers.
According to the agreement signed yesterday, Delek Group has acquired 22.45% of the exploration, development and production rights for oil and gas in the Caesar Tonga field. Located in the Gulf of Mexico 300 km south of Louisiana at a depth of 1500 m, the field contains 8 wells connected by an undersea pipeline network to a production platform owned by Anadarko, which transports the oil and gas through an existing pipeline to the coasts of Louisiana and Texas. Since the development of the Caesar Tonga is based on existing infrastructure, it has a low cost of production.
Production from the field commenced in 2012 and the current production rate stands at 71 000 boe/d (total gross), with 90% of the output being oil. The expected life of the field is 30 more years, and Delek Group's interest reflects 78 million boe (2P) reserves assuming no change in the current production rate. The Group's share of the asset generates annual EBITDA of approximately USD 230 million.
The transaction is taking place for a consideration of US$965 million, with the closing payment estimated to be US$785 million after adjustment of the cumulative net cash flow at the asset from the effective date of the transaction (January 1, 2019) until the date of completion of the transaction by the end of the third quarter of 2019. Financing of the transaction will be by reserve based loan (RBL) facilities from a consortium of international banks granted to the special purpose entity, and through debt which will be taken out by the purchaser (a wholly-owned foreign subsidiary of Delek Group), with liens on the asset linked to the foreseen annual cashflow of US$230 million. (This is based on an assumed daily production of 16 000 bbls at an average price of US$60 per bbl.) Note that all debt issued to the acquiring entity is non-recourse to Delek Group.
The transaction is subject to a number of contingencies, foremost of which is the right of first refusal held by the three other co-owners in the field. This can be exercised within 30 days of the execution of the asset purchase agreement. The transaction is also subject to obtaining all regulatory authorisations.
Asaf Bartfeld, President & CEO, Delek Group: “The transaction for acquisition of the rights in the Caesar Tonga field is a further important stage in implementing Delek Group’s strategy to expand and establish our operations on the international stage. This is a strategic opportunity, which provides the Group access to a producing oil asset with significant proven reserves, with a strong cash flow and partnership with leading players in the global energy market. This activity, alongside the oil and gas exploration activity we are carrying out in the North Sea and the Gulf of Mexico, gives added emphasis to the Group’s position in the international energy market.”
Read the article online at: https://www.oilfieldtechnology.com/offshore-and-subsea/11042019/delek-group-acquire-interest-in-caesar-tonga/