Currently, oil production in this area of the Permian basin area sits at roughly 5,500 boepd. The acquisition includes rougjly 15,500 acres in Upton and Reagan counties in the Midland basin. This agreement extends Vital Energy’s oil-weighted inventory life by adding roughly 30 operated horizontal location in the Woldcamp B. This includes four drilled, yet un completed locations.

“This purchase strengthens Vital by expanding our footprint into Upton County, adding high-return inventory and a new development area in the Midland basin,” stated Jason Pigott, President and CEO. “We plan to develop these assets over the next two to three years without increasing our current activity levels, highlighting our commitment to maintaining capital discipline and maximizing Free Cash Flow generation.”

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Previously, INPEX held multiple tight oil development and production assets through its American subsidiary, INPEX Americas as the primary operator. INPEX acquired the oil production and development assets in 2019.

This action marks the divestment of all activities in the state of Texas, which INPEX reports having a “minimal impact” on its consolidated financial results.

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oil rig in the Permian Basin
Matador said Advance had an estimated production in the first quarter last year of 24,500 to 25,500 barrels of oil and natural gas equivalent per day. It also has about 18,500 net acres in the northern Delaware Basin, which is part of the larger Permian formation.

The purchase of Advance, which is currently controlled by private equity firm EnCap Investments LP, is expected to be completed early in the second quarter, Dallas-based Matador said. Matador also agreed to pay an additional cash consideration of $7.5 million for each month this year in which the average oil price exceeds $85 a barrel.

The acquisition comes just a day after Texas oil firm HighPeak Energy Inc., which explores in the Permian Basin, said it was considering selling itself. The region — the largest and most productive US oil patch — has long been a focus of consolidation because of its size and scale.

Matador CEO and founder Joseph Foran said in a conference call on Jan. 24 that he is bullish about the quality of acreage his company acquired. There have been concerns about dwindling inventory of top-tier well sites in west Texas.

Matador shares were down 0.8% at 10:04 a.m. in New York trading.

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That is the asset-backed securitization (ABS) transaction known as the proved developed producing (PDP) securitization, whereby an oil or gas producer issues bonds. In other words, upstream producers use the money they make from producing oil and/or gas as security for the notes they sell to investors.

Asset Securitization for Energy

As many private producers want to diversify their finance sources, the first of these energy asset securitizations took place in 2019, but they have since grown in popularity.

When this type of funding was brand new and the pandemic hadn’t yet decimated oil demand, Fitch Ratings stated in early 2020 that securitizations supported by oil and gas assets helped broaden sources of funding for businesses that would customarily access capital from more conventional sources, such as reserve-based lending (RBL) facilities, high-yield bond issuance, or equity investment.

The rating agency stated back in February 2020 that the freshly issued deals provide reliable cash flow as decline rates are pretty predictable based on the age of the wells and the overall diversity.

Oil and gas proved developed-producing (PDP) securitizations showed significantly less volatility, even during the pandemic and the erratic prices in 2020 and 2021. This was largely due to commodity price hedging instruments and structural features of the securitizations, credit ratings firm DBRS Morningstar stated in May 2021.

Fitch Ratings stated in a research report in September 2021 that despite considerable fluctuation in oil and gas prices and operator bankruptcies during the pandemic, PDP securitization’s performance remained robust under COVID.

The majority of production quantities must be hedged, which reduces the impact of hydrocarbon price variations on anticipated revenues. Additionally, because the bulk of capital expenses have already been invested, PDP output has low breakeven costs, according to the credit rating agency.

Energy ABS Market is booming

According to statistics from Guggenheim Securities published by Reuters, the oil and gas asset securitization industry has truly taken off in 2022, with energy ABS deals tripling in magnitude from 2021. Private companies have sold $3.9 billion in PDP securitizations to investors so far this year, up from just $1.2 billion a year ago.

Since the PDP securitization funding arrangements started three years ago, this year also saw the single-largest securitization financing for a U.S. energy producer, backed by a percentage of its producing assets.

It was a $750 million securitized financing deal in October for natural gas producer Jonah Energy LLC, a business with headquarters in Denver that operates in the Jonah and Pinedale Fields of Sublette County, Wyoming. Providing $750 million in fully amortising notes secured by a portion of its producing properties, Jonah Energy was able to conclude its first securitized financing deal.

Over 2,400 producing wells and more than 130,000 net acres are part of Jonah Energy’s activities and assets, which are situated in Sublette County, Wyoming, in the Greater Green River Basin.

Tom Hart, president and CEO of Jonah Energy, said that he was pleased to have completed a long-term financing transaction that completely pays down the RBL, positioning them with a robust balance sheet to continue pursuing the substantial drilling possibilities that they have on their acreage and strategic opportunities that may come their way.

Jonah Energy’s asset-backed securitization was the largest one to date, according to Guggenheim Securities, which served as the offering’s sole structuring consultant, book-running administrator, and placement agent.

Anuj Bhartiya, Senior Managing Director in Guggenheim’s Structured Products Origination team, said that this ABS transaction, which is the largest PDP securitization finished to date and the third 144A that Guggenheim Securities has organised for the energy sector, tends to reflect the trust of industry leaders and market players in the appropriateness of energy-related ABS in the market.

After successfully completing one last year, PureWest Energy, Wyoming’s largest natural gas producer, completed another asset-backed securitization in August, selling $365 million in asset-backed notes that were secured by a portion of PureWest’s producing natural gas assets. The deal came after PureWest’s initial financing in November 2021 for $600 million.

PureWest Energy anticipated paying out its equity investors in the third quarter of 2022 with the proceeds from the note issue and any remaining cash on its balance sheet.

According to an article published in Hart Energy last year by Daniel Allison, an energy finance partner with the law firm Sidley Austin LLP, oil and gas securitization deals may be advantageous for both investors and producers. Production risk is seen as a manageable variable by investors and rating agencies because investors can foresee the cash flow pattern of an oil and gas PDP. When other markets are less favourable, producers can employ energy asset monetization to either vary their capital structure or access this alternate market, according to Allison.

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“We are pleased to announce the close of our acquisition of Ensign’s high-quality assets in the core of the Eagle Ford Shale,” said chairman, president, and CEO Lee Tillman. “This acquisition satisfies every element of our disciplined acquisition criteria. It’s immediately accretive to our key financial metrics, it will drive higher shareholder distributions consistent with our operating cash flow driven Return of Capital framework, it’s accretive to our inventory life with attractive locations that immediately compete for capital, and it offers truly compelling industrial logic given our existing Eagle Ford footprint and our track record of execution excellence in the play.”

The assets acquired from Ensign Natural Resources (99% operated, 97% working interest) span Live Oak, Bee, Karnes, and Dewitt Counties across the condensate, wet gas, and dry gas phase windows of the Eagle Ford. Marathon Oil believes it can deliver maintenance level production from the acquired asset of 67,000 net boepd (22,000 net bopd of oil) with approximately 1 rig and 35 to 40 wells to sales per year. The Company’s valuation of the asset was based off this maintenance level program and does not include any synergy credits or upside redevelopment opportunity. Acquired tangible assets are eligible for full expensing for the purpose of income tax optimization, including potential deferral of AMT.

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A perfect storm of underinvestment in new energy sources, cold weather that coincided with coal outages and supply problems, low renewable generation, and high global commodity prices led to the current situation. The market was pushed to the brink of collapse by this extraordinary combination, according to Principal Analyst, Global LNG at Wood Mackenzie, Daniel Toleman.

The crisis did demonstrate the necessity for new sources of energy supplies to fulfil current and future demand, but LNG producers intervened to reroute gas to locations that needed it. The winter’s record-breaking price increases for gas, coal, and electricity set off the nation’s dilemma.

In the middle of Australia’s clean energy transition, the crisis presents a challenge to the nation in maintaining its efforts to attain its net zero target by 2050 while preserving its energy security.

The federal government must tread a fine line in order to control the energy balance along Australia’s east coast. Prioritizing Australian gas resources for Australian customers is very much in the limelight following this winter’s energy crisis, according to Lucy Cullen, Principal Analyst, Global Gas. But in addition, the government must oversee new gas developments and gas supply, especially LNG projects.

Australia needs gas, says Wood Mackenzie, alongside other industrial uses like fertilisers, chemical manufacturing, mineral processing, and mining.

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“The 2022 capital budget reflects Chevron’s enduring commitment to capital discipline,” said Chevron Chairman and CEO Mike Wirth. “We’re sizing our capital program at a level consistent with plans to sustain and grow the company as the global economy continues to recover.”

Consistent with its track record of returning excess cash to shareholders, the company is raising its share buyback guidance range to $3 to $5 billion per year, versus prior guidance of $2 to $3 billion per year. “We’re a better company than we were just a few years ago. We’re more capital and cost efficient, guided by a clear and consistent objective to deliver higher returns and lower carbon,” Wirth continued. “And this enables us to return more cash tAdd Imageso shareholders.”

Details of the 2022 Organic Capital and Exploratory Investment Program include:

Upstream

In the upstream business, approximately $8 billion is allocated to currently producing assets, including about $3 billion for Permian Basin unconventional development and approximately $1.5 billion for other shale & tight assets worldwide. Additionally, $3 billion of the upstream program is planned for major capital projects underway, of which about $2 billion is associated with the Future Growth Project and Wellhead Pressure Management Project (FGP / WPMP) at the Tengiz field in Kazakhstan. Finally, approximately $1.5 billion is allocated to exploration, early-stage development projects, midstream activities and carbon reduction opportunities.

Downstream

Approximately $2.3 billion of planned organic capital spending is associated with the company’s downstream businesses that refine, market and transport fuels, and manufacture and distribute lubricants, additives, and petrochemicals. This also includes capital to grow renewable fuels and products businesses.

Chevron is one of the world’s leading integrated energy companies. We believe affordable, reliable and ever-cleaner energy is essential to achieving a more prosperous and sustainable world. Chevron produces crude oil and natural gas; manufactures transportation fuels, lubricants, petrochemicals and additives; and develops technologies that enhance our business and the industry. We are focused on lowering the carbon intensity in our operations and seeking to grow lower carbon businesses along with our traditional business lines.

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The results were primarily driven by higher oil prices and a recovery in worldwide demand, supported by the global easing of COVID-19 restrictions, vaccination campaigns, stimulus measures and accelerating activity in key markets.

Commenting on the results, Aramco President & CEO Amin H. Nasser, said:
“Our second quarter results reflect a strong rebound in worldwide energy demand and we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum. While there is still some uncertainty around the challenges posed by COVID-19 variants, we have shown that we can adapt swiftly and effectively to changing market conditions.

“Our historic $12.4 billion pipeline deal was an endorsement of our long-term business strategy by international investors, representing significant progress in our portfolio optimization program. Our landmark $6 billion Sukuk reinforced our robust balance sheet, further diversifying our funding sources and expanding our investor base. And, once again, we delivered a dividend of $18.8 billion for our shareholders.

“We continue to move forward on a number of strategic programs, which focus on sustainability and low-carbon fuels, maximizing the value of our assets, and advancing our downstream integration and expansion journey. For all these reasons and more, I remain extremely positive about the second half of 2021 and beyond.”

Financial Highlights
Aramco’s net income was $25.5 billion in the second quarter of 2021, compared to $6.6 billion in the same quarter of 2020. Net income for the first half of 2021 was $47.2 billion, compared to $23.2 billion in the first half of 2020. The increase in both periods was primarily driven by higher crude oil prices, improved downstream margins and the consolidation of SABIC’s results, partially offset by lower crude oil volumes sold and higher crude oil production royalties.

Free cash flow* was $22.6 billion in the second quarter and $40.9 billion for the first half of 2021, compared to $6.1 billion and $21.1 billion, respectively, for the same periods in 2020.

The gearing ratio*was 19.4% on June 30, compared with 23% on December 31, 2020. The decrease was primarily due to higher cash and cash equivalents on June 30 2021, mainly driven by stronger operating cash flows and cash proceeds in connection with Aramco’s stabilized crude oil pipelines transaction.

Capital expenditure was $7.5 billion in the second quarter and $15.7 billion for the first half of 2021, representing an increase of 20% and 15%, respectively, compared with the same periods in 2020. This increase was primarily due to the start of initial phases of construction and procurement activities relating to increment projects, demonstrating the company’s ability to mobilize capital to target growth opportunities, and the consolidation of SABIC’s capital expenditure. At the same time, the Company maintains a highly disciplined and flexible approach to capital allocation, and continues to expect its 2021 capital expenditure to be approximately $35 billion.

Aramco closed a $12.4 billion pipeline infrastructure deal with an international consortium that acquired a 49% stake in the newly formed Aramco Oil Pipelines Company, in which Aramco remains the majority shareholder. Under a 25-year lease and leaseback agreement, Aramco Oil Pipelines Company will receive a tariff payable by Aramco for stabilized crude oil flows, backed by minimum volume commitments. This investment demonstrates investor confidence in the Company’s long-term outlook.

The Company raised $6 billion through the sale of US dollar-denominated Shari’a-compliant securities to leading institutional investors. The issuance comprised three tranches of direct and unsecured Sukuk trust certificates issued under Aramco’s newly established International Sukuk Program. Funds raised were allocated for general corporate purposes.

Operational Highlights
Aramco continued its strong track record of reliable supply, achieving 100% reliability in the delivery of crude oil and other products in the second quarter of 2021.

The Company also demonstrated its reliable Upstream performance, with average total hydrocarbon production of 11.7 million barrels per day of oil equivalent in the second quarter of 2021.

The Company successfully completed and tied-in the ‘Ain Dar and Fazran crude oil increments during the second quarter. These increments target secondary reservoirs with a combined production capacity of 175 mbpd.

Representing a significant step in SABIC becoming Aramco’s chemicals arm, Aramco is transferring the marketing and sales responsibility for a number of Aramco petrochemicals and polymers products to SABIC, and the offtake and resale responsibility of a number of SABIC products is being transferred to Aramco Trading Company (ATC). These changes are intended to focus SABIC on polymers and derivative products while ATC focuses on fuels, aromatics and MTBE, driving further operational efficiencies, strengthening the brands of both companies and improving overall competitiveness. Considerable synergies are being captured, mainly in procurement, supply chain, feedstock optimization, stream integration, operations and maintenance.

The Company continued to contribute to COVID-19 vaccination efforts during the second quarter to protect its workforce and the wider community from the risk of infection. The Company’s ongoing vaccination campaign for employees and their families complements a government vaccine program, resulting in 95% of employees and 70% of their dependants receiving at least one dose by the end of June.

Aramco participated in the creation of Altamayyuz Finance and Accounting Excellence Academy, a collaboration between leading accountancy firms and investment banks to establish a center of excellence for finance and accounting in Saudi Arabia. The academy aims to build the capabilities of top finance and accounting graduates, supporting growth of the region’s financial services sector and forming a highly-skilled talent pool for the Company and other private and public employers.

The post Aramco announces second quarter and half-year 2021 results appeared first on Oil&Gas Advancement.

The acquisition has been made by Empire Petroleum’s subsidiary Empire New Mexico from ExxonMobil’s XTO Holdings. Empire said that the assets comprise about 700 gross oil, gas, and injector wells. It also includes approximately 40,000 net acres of Permian leasehold.

The upstream assets are located in the Eunice Monument (EMSU) and Arrowhead Grayburg (AGU) fields.

These fields are located on the north-western edge of the Permian Basin’s Central Basin Platform in south-eastern Lea County. Empire Petroleum president Mike Morrisett said: “We believe the EMSU and surrounding acquired fields have a significant resource base.

“In our view, these assets have current infill drilling and return-to-production well potential that should shortly enhance daily production. Morrisett said that the acquisition brings Empire’s aggregate of over 100,000 net leasehold acres and approximately1800 net BOEPD in five states.

Empire CEO Tommy Pritchard added, “This acquisition is a terrific example of what Empire looks to manage in their assets: mature producing oil properties with predictable, long life production with significant upside potential. “Looking towards the future, the geologic location of the Permian EMSU and AGU holds 23,400 acres of residual oil zone potential (ROZ).”

Moreover, Empire New Mexico has signed a $16.25m senior secured convertible note with Energy Evolution Master Fund, to fund the transaction. Earlier this year, ExxonMobil has agreed to divest its upstream assets in the UK North Sea for more than $1bn to NEO Energy, part of Norway’s HitecVision.

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Commenting on the results, Aramco President & CEO Amin H. Nasser, said:
“Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.

“Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter.

“We will continue to pursue our long-term growth and diversification strategy to capture unrealized and additional value from every hydrocarbon molecule we produce – driving global commerce and enhancing people’s lives. The completion of our historic acquisition of a 70% stake in SABIC is yet more evidence of that forward momentum and a testament to our healthy financial position.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world.”

Financial Highlights
Despite continued global economic disruption and challenges facing the energy sector, Aramco continued to deliver on its commitment to shareholders by declaring a dividend of $18.75 billion for the second quarter, compared to $13.4 billion for the second quarter of 2019.

Aramco navigated challenging market conditions to record net income of $6.6 billion for the second quarter and $23.2 billion for the first half of 2020, respectively, compared to $24.7 billion and $46.9 billion in the corresponding periods of 2019. This demonstrates Aramco’s agility, strength and resilience across market cycles.

Free cash flow* was $6.1 billion in the second quarter and $21.1 billion for the first half of 2020, respectively, compared to $20.6 billion and $38.0 billion for the same periods in 2019.

The gearing ratio* was 20.1% at the end of June, mainly reflecting deferred consideration for the Saudi Basic Industries Corporation (SABIC) acquisition and the consolidation of SABIC’s net debt onto Aramco’s balance sheet.

Capital expenditure was $6.2 billion in the second quarter and $13.6 billion for the first half of 2020. Aramco continues to implement its capital spending optimization and efficiency program, and expects capital expenditure to be at the lower end of the $25 billion to $30 billion range for 2020.

Operational Highlights
The COVID-19 pandemic has spread rapidly throughout the world, resulting in substantial reductions in consumer and business activity and significantly reduced demand for crude oil, natural gas and petroleum products.

Under these challenging market conditions, Aramco continued its strong track record of reliable supply, achieving 99.8% reliability in the delivery of crude oil and other products in the second quarter of 2020.

The Company demonstrated reliable upstream performance with total hydrocarbon production of 12.7 million barrels per day of oil equivalent in the second quarter of 2020.

Aramco achieved a historic highest single day crude oil production of 12.1 million barrels on April 2, 2020.

To meet future global and domestic energy demand, Aramco continues to expand its gas business. In line with this strategy, the Fadhili Gas Plant reached its full production capacity of 2.5 billion standard cubic feet per day during the second quarter, after successfully completing its commissioning activities.

The Downstream business continues to deliver on its long-term strategy of strategic integration and diversification.

In June 2020, Aramco successfully completed the acquisition of a 70% stake in SABIC, for $69.1 billion. SABIC is a world-class, diversified petrochemicals company with complementary chemicals capabilities. The acquisition enhances Aramco’s existing Downstream portfolio, accelerates its petrochemicals growth, increases existing chemicals volumes and expands its international reach.

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