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Aera Energy Sold to IKAV Exxon&Shell Divest of CA Crude Producer

California oil joint venture, Aera Energy, of Exxon Mobil Corp. and Shell Plc is being sold to German asset manager IKAV, according to the agreement of Sept. 1.

Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed.

Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors.

Exxon Mobil quitted its Barnett Shale and Canada shale positions earlier this year as part of the company’s corporate strategy to highlight investments in advantaged assets with the lowest cost of supply. Additionally, Exxon Mobil recently said it sold its Fayetteville Shale position to Flywheel Energy.

Being a part of the strategy to persistently make stronger the industry-leading portfolio, concentrating the investments in low-cost-of-supply oil and natural gas the sale satisfies consumer demand and creates value for Exxon Mobil’s shareholders.

Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d.

Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system.

The sale does not affect Exxon Mobil’s branded network of about 500 independently owned retail sites in California.

Shell also controls a statewide footprint in California that includes gas and power trading, electric vehicle (EV) charging, hydrogen, and LNG fueling stations, retail and lubricants, distribution facilities, and terminals. The company has operated in California for more than 100 years.

The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.

Regardless of its origins in renewable energy, IKAV has an established track record in owning and operating U.S.-based energy assets and the company reported that its investment in Aera highlights that conventional energy will continue to play a vital role in California’s energy supply during the state’s transition to renewable sources.

In 2019, IKAV got BP Plc’s San Juan gas assets, which are in Colorado and New Mexico and comprised more than 650,000 acres, producing around 600 MMcfe/d. Led by Bobby Saadati, the U.S. team has offices in Durango, Colorado, and Houston, Texas.

Headquartered in Bakersfield, California, most of Aera’s oil production originates from Kern County. After the transaction, Aera will stay as an operator, which centers in the San Joaquin Valley, the transaction has an effective date of Oct. 1, and is anticipated to close in fourth-quarter 2022, according to the Shell release.

Truist Securities and Wells Fargo Securities were financial advisers to IKAV as well. Haynes & Boone LLP acted as legal adviser to IKAV. Citigroup was the lead financial adviser to IKAV for the transaction.

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Tyler Reitmeier Tel. +1 713-203-3128 Email: treitmeier@hartenergy.com

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Certified Low Emissions Gas - Williams & PennEnergy Partner Together

Williams said on Aug. 8, that it concluded an agreement to support the selling and transportation of certified, low emissions next-gen natural gas from PennEnergyResources LLC. According to the deal, Williams will construct a marketing portfolio to market the natural gas to utilities, LNG export facilities, and other facilities which can efficiently use clean energy. Moreover, the agreement involves a certification process that verifies best practices are being followed to reduce emissions and produce natural gas in an environmentally responsible manner collaborating with an independent third party. The partnership with PennEnergy is a continuation of Williams' strategy to collect, market, and deliver low-carbon natural gas to the end user from the wellhead. PennEnergy’s 378 production wells in southwest Pennsylvania supply the US with natural gas and they have achieved Platinum status from Project Canary’s TrustWell certification.

Kinder Morgan Inc. decided to sell half of its 51% interest in an LNG facility in Georgia on September 27 with proceeds allocated by the Houston-based company to pay short-term debt and buy back shares. As it is acknowledged, an undisclosed financial buyer purchases the 25.5% equity interest in Elba Liquefaction Co. LLC (ELC) for approximately $565 million. ELC is a joint venture (JV) established in 2017 to build and own the Elba liquefaction facility situated on #Elba Island in Chatham County, Georgia. After completion, Kinder Morgan and the undisclosed financial buyer will each hold a 25.5% stake in ELC. Meanwhile, Blackstone Credit will continue to hold a 49% interest. The value of the equity interest considers an enterprise value of almost $2.3 billion for ELC, which is about 13 times 2022E EBITDA. The transaction has an economic effective date of July 1. The Elba liquefaction facility has 10 modular liquefaction units for a total capacity of roughly 2.5 million tonnes per year of LNG. Kinder Morgan considers it equivalent to almost 350 MMcf/d of natural gas.

On January 6, Phillips 66 announced that it plans to acquire more than 43% of DCP Midstream LP for $3.8 billion, expanding the business in the oil & gas business.

On January 5 Northern Oil & Gas (NOG) concluded a deal to acquire working interests in Midland-Petro D.C. Partners LLC (MPDC)'s Mascot Project in the Midland Basin, according to a January 9 press release. Firstly estimated at $330 million in cash, the deal was signed with an additional 3.25% working interest added to the 36.7% agreed upon when the transaction was announced on October 19. NOG paid $29 million more for the additional interests, which now totalled 39.958%. Finally, the deal closed for $320 million in cash and $43 million in debt at signing in October with the finance of Minnetonka, Minn.-based NOG with cash on hand, operating free cash flow, and assistance from its revolving credit facility.

Talos Energy Inc. is closing its $1.1 billion purchase of private operator EnVen Energy. A special meeting for Talos’ stockholders to vote on the deal and other matters is set on February 8, according to a prospectus filed on January 11 with the Securities and Exchange Commission. Shareholders are being asked to approve the EnVen merger, which as the company considered in September would raise its Gulf of Mexico production up to 40%. According to a January 11 press release, Talos asserted that it anticipates closing the transaction soon after the meeting. Talos Energy Inc. supposes that adding EnVen would double its operated deepwater facility footprint, extending key infrastructure in existing Talos operating areas. More than 80% of the combined assets will be deepwater, with the company operating more than 75% of the acreage it holds interests in. Talos is one of the largest independent operators in the U.S. Gulf of Mexico, with production operations, prospects, leases, and seismic databases spanning the basin in both Deep Water and Shallow Water. The company aims to actively grow through a balanced focus on asset optimization, development, and exploration while also seeking to add to its portfolio through acquisitions and business development.

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