Print

Sparrows Group extends relationship with Vedanta with three-year rental crane contract renewal

Sparrows Group has secured a three-year contract renewal to supply a rental crane to Vedanta Resources Limited, extending its relationship with the company to nine years.

A Sparrows manufactured ECR-20 crane will be mobilised to the Lakshmi and Gauri oil and gas fields of Cairn Oil & Gas, located off the west coast of India, near Cambay basin in Gujarat. Vedanta has been operating these blocks since 2017, following the merger of Cairn India with Vedanta Limited.

The crane will be used to support well service operations across multiple platforms in the fields. As part of the workscope, Sparrows will also conduct various upgrades on the crane, which has been operated by Vedanta since 2011.

2020 07 27 202456

The enhancements will include a new boom, winches, lifting sheaves, load indicator and wire ropes to assure the ongoing safety and performance of the crane. It will also be further adapted to increase the current lifting capacity from 15Te to 18Te.

The upgrade work is being undertaken at Sparrows’ workshop in Mumbai with the offshore mobilisation planned for September this year, when experienced lifting personnel from the facility will be installing, commissioning and operating the crane in the field.

Stewart Mitchell, chief executive officer of Sparrows said: “We have developed a strong relationship with Vedanta since 2011 and this further three-year contract demonstrates the value our services and equipment have delivered and our continued commitment to operational and safety excellence.

“We’ve been supporting clients in India since 2011, the country continues to be an area of growth for Sparrows and we have established a good track record in the region. Our engineering capability in Mumbai and our ability to carry out work locally has been a crucial part of this, as well as the work with Vedanta it has also enabled us to undertake a multi-million-pound contract with India’s Oil and Natural Gas Corporation (ONGC) for the refurbishment of 21 cranes.”

The Sparrows Group is a global provider of specialist equipment and integrated engineering services to the oil and gas, renewables and industrial sectors. The firm supports customers by delivering a broad range of expert solutions that optimise efficiency and ensure the performance, reliability and safety of critical equipment and people.

www.sparrowsgroup.com

Print

Schlumberger’s outlook for stability and future growth supported by severe cost cutting measures, says GlobalData

Following the release of Schlumberger’s Q2 2020 earnings call;

Effuah Alleyne, Senior Oil & Gas Analyst at GlobalData, a leading data and analytics company, offers her view:

“As with many companies in the oil and gas industry, Schlumberger has taken the approach to reduce capital spending and focus on enhancing existing performance through technology. The company’s short-term focus to re-align the business with a new, leaner organizational structure has come at a huge price as it has had to hand out severance payments to the tune of US$1bn - roughly translating to thousands of lost jobs - as well as make cut backs on infrastructure and assets. Schlumberger remains keen on executing capital discipline, allocating capital to areas of solid returns, as well as to expand its reliance on digital technology solutions – especially for reservoir evaluation.

2017 04 20 114457“Severely cutting its workforce has meant digital technology has become an even more critical aspect of its new business model, with remote drilling operations increasing by 25% in Q2 and the implementation of digital inspections. Globally, the company has also fielded several digital solutions contracts geared toward increasing reservoir evaluation performance, including an agreement with ExxonMobil deploying DrillOps and DrillPlan technology. Furthermore, Schlumberger was awarded a contract by Dragon Oil that enables agile reservoir modeling through DELFI – the first partnership of its kind in the Middle East and North Africa region. With this strategy in play, Schlumberger looks to further mitigate its losses - considering its overall revenue dropped in Q2 by 28% over Q1 to US$5.4bn - but there isn’t much room however for comfort.

“While the sharp contraction of the North American market caused a 48% decrease in revenue for Schlumberger in this region, that only accounts for less than a third of its business. Of greater concern is international revenue, which may have only decreased by 19% in Q2 over Q1, but accounts for over two thirds of the company’s market and poses a high risk - especially considering a shrinking market with project setbacks and delays, on top of no clear signs of an infusion of new capex. While focus’ on China and OPEC+ countries may yield advantageous markets, Schlumberger should consider diversifying their portfolio, perhaps considering the alternative energy market as an option.”

About GlobalData

4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make timelier and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.

Print

Chevron Announces Agreement to Acquire Noble Energy

Chevron Corporation has just announced that it has entered into a definitive agreement with Noble Energy, Inc. (NASDAQ: NBL) to acquire all of the outstanding shares of Noble Energy in an all-stock transaction valued at $5 billion, or $10.38 per share. Based on Chevron’s closing price on July 17, 2020 and under the terms of the agreement, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share. The total enterprise value, including debt, of the transaction is $13 billion.

The acquisition of Noble Energy provides Chevron with low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio. Noble Energy brings low-capital, cash-generating offshore assets in Israel, strengthening Chevron’s position in the Eastern Mediterranean. Noble Energy also enhances Chevron’s leading U.S. unconventional position with de-risked acreage in the DJ Basin and 92,000 largely contiguous and adjacent acres in the Permian Basin.

Chevron Logo“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” said Chevron Chairman and CEO Michael Wirth. “This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources. Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve our ability to generate strong cash flow. These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline. We look forward to welcoming the Noble Energy team and shareholders to bring together the best of our organizations.”

“This combination is expected to unlock value for shareholders, generating anticipated annual run-rate cost synergies of approximately $300 million before tax, and it is expected to be accretive to free cash flow, earnings, and book returns one year after close,” Wirth concluded.

“The combination with Chevron is a compelling opportunity to join an admired global, diversified energy leader with a top-tier balance sheet and strong shareholder returns,” said David Stover, Noble Energy’s Chairman and CEO. “Over the last few years, we have made significant progress executing our strategic objectives, including driving capital efficiency gains onshore, advancing our offshore conventional gas developments and significantly reducing our cost structure. As we looked to build on this positive momentum, the Noble Energy Board of Directors and management team conducted a thorough process and concluded that this transaction is the best way to maximize value for all Noble Energy shareholders. We look forward to bringing together our highly complementary cultures and teams to realize the long-term value and benefits that this combination will deliver.”

Transaction Benefits

  • Low Cost Acquisition of Proved Reserves and Attractive Undeveloped Resource: Based on Noble Energy’s proved reserves at year-end 2019, this will add approximately 18 percent to Chevron’s year-end 2019 proved oil and gas reserves at an average acquisition cost of less than $5/boe, and almost 7 billion barrels of risked resource for less than $1.50/boe.
  • Strong Strategic Fit: Noble Energy’s assets will enhance Chevron’s portfolio in:
    • U.S. onshore
      • DJ Basin – New unconventional position with competitive returns that can be further developed leveraging Chevron’s proven factory-model approach.
      • Permian Basin – Complementary acreage that enhances Chevron’s strong position in the Delaware Basin.
      • Other ­– An integrated midstream business and an established position in the Eagle Ford.
    • International
      • Israel – Large-scale, producing Eastern Mediterranean position that diversifies Chevron’s portfolio and is expected to generate strong returns and cash flow with low capital requirements.
      • West Africa – Strong position in Equatorial Guinea with further growth opportunities.
  • Attractive Synergies: The transaction is expected to achieve run-rate operating and other cost synergies of $300 million before-tax within a year of closing.
  • Accretive to Return on Capital Employed, Free Cash Flow, and EPS: Chevron anticipates the transaction to be accretive to ROCE, free cash flow and earnings per share one year after closing, at $40 Brent.

Transaction Details

The acquisition consideration is structured with 100 percent stock utilizing Chevron’s attractive equity currency while maintaining a strong balance sheet. In aggregate, upon closing of the transaction, Chevron will issue approximately 58 million shares of stock. Total enterprise value of $13 billion includes net debt and book value of non-controlling interest.

The transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close in the fourth quarter of 2020. The acquisition is subject to Noble Energy shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.

The transaction price represents a premium of nearly 12% on a 10-day average based on closing stock prices on July 17, 2020. Following closing of the transaction, Noble Energy shareholders will own approximately 3% of the combined company.

Advisors

Credit Suisse Securities (USA) LLC is acting as financial advisor to Chevron. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Chevron. J.P. Morgan Securities LLC is acting as financial advisor to Noble Energy. Vinson & Elkins LLP is acting as legal advisor to Noble Energy.

About Chevron

Chevron Corporation is one of the world's leading integrated energy companies. Through its subsidiaries that conduct business worldwide, the company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemicals and additives; generates power; and develops and deploys technologies that enhance business value in every aspect of the company's operations. Chevron is based in San Ramon, Calif. More information about Chevron is available at www.chevron.com.

About Noble Energy

Noble Energy is an independent oil and natural gas exploration and production company committed to meeting the world’s growing energy needs and delivering leading returns to shareholders. The Company operates a high-quality portfolio of assets onshore in the United States and offshore in the Eastern Mediterranean and off the west coast of Africa. Founded more than 85 years ago, Noble Energy is guided by its values, its commitment to safety, and respect for stakeholders, communities and the environment. For more information on how the Company fulfills its purpose: Energizing the World, Bettering People’s Lives®, visit www.nblenergy.com.

Print

UK upstream sector remains resilient through turbulent times, says GlobalData

The UK upstream oil and gas sector has become leaner and more resilient over recent years, as pullbacks in investment and reduced operating costs has helped provide a stronger cash flow outlook under newly weakened oil and gas prices, says GlobalData, a leading data and analytics company.

Daniel Rogers, Oil and Gas Analyst at GlobalData, comments: “Despite a relatively expensive operating environment, a favorable fiscal regime and vast active infrastructure has helped the UK oil and gas sector to remain attractive.

“Under a base case oil price of US$45/bbl for 2020, the outlook for post-tax cash flow/boe is in line with 2013 levels when oil prices were over US$100/bbl. The country has been able to improve cash flow margins as investments are reduced and costs optimized.”

2020 07 21 102526

Despite the direct impacts of COVID-19 on the UK oil and gas sector, production levels are expected to remain relatively unaffected in spite of a number of operational assets being hit by related disruptions.

Rogers adds: “The last three years have seen significant field reserves come on-stream in the UK through developments sanctioned prior to the 2014 price crash. The UK has a steady near term production outlook through already sanctioned developments and COVID-19 disruptions are unlikely to drastically hamper 2020 volumes. Despite this, investment in the sector is forecast to dip this year from 2019 levels and the capital expenditure outlook remains particularly weak.”  

  • Quotes provided by Daniel Rogers, Oil and Gas Analyst at GlobalData

About GlobalData

4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors. 

Print

Venezuela’s oil and gas sector sees worst crisis during 2020, says GlobalData

Venezuela’s oil and gas sector was already caught in a vicious cycle well before the COVID-19 outbreak created a world economic crisis. Even though there are several international companies still remaining in the country, they are not investing in any relevant manner and have minimum personnel. GlobalData Oil & Gas Analyst Adrian Lara notes that it is fair to assume that, for most of these operators, the best scenario would be to wait for a change in government that could kick-start the sector under renewed rules or laws and improve their partnership terms with PDVSA. However, the political situation in the country seems to be going nowhere in the near future, and even with a change of regime, the oil and gas sector will require many years to recover.

2017 04 20 114457Lara explains: “The country’s hydrocarbon sector has suffered from chronic underinvestment for years, with noteworthy kicks including 2019, when the US Government imposed sanctions on the country’s oil trade - its main source of revenue. This has effectively restricted the exporting capabilities of the country, created operational bottlenecks and left the Venezuelan Government, and its NOC PDVSA, with fewer and fewer means to invest in the sector. The outcome of all these events has been a continuous oil production decline since 2015, with a historic low output in May, reported at 570 thousand barrels per day (mbd), and with only one oil rig operating in the country.

“After the 2019 sanctions, exports to China and India somehow compensated the loss of US buyers. However, during 2020, both lower demand for crude worldwide and a tightening of sanctions have reduced export capability to its worse level to date. Lower exports have led to an increase in the storage capacity utilization of the country, which has a peak operating capacity estimated at less than 40 million barrels. In consequence, the Orinoco Belt has experienced additional production cuts. Production in this area is currently estimated at 161mbd, already three times lower than in 2019.

“As for natural gas, there were some promising projects announced to develop Venezuela’s vast offshore reserves. In fact, during the last five years. negotiations between the Venezuelan government with Russia’s and Trinidad and Tobago’s counterparts had put these projects back on track. However, after a worsening of the political and economic climate of the country these projects are currently on hold.”

About GlobalData

4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.