ExxonMobil, Shell sell North Sea oil and gas assets to Tenaz Energy for $246 million
(WO) – Tenaz Energy Corp. has entered into an agreement with Nederlandse Aardolie Maatschappij B.V. (“NAM”), a 50/50 joint venture between Shell and ExxonMobil, to acquire all of the issued and outstanding shares of NAM Offshore B.V. (“NOBV”) for $246 million.
NOBV is expected to produce nearly 11,000 boed and generate approximately $134 million of free cash flow based on current strip prices in 2024. NOBV’s cash flow profile is underpinned by a combination of physical fixed-price and collar hedges for 2024 through 2026.
Highlights
Delivers on M&A strategy. Tenaz will acquire a high margin, low-decline asset base with high-capacity infrastructure, low risk development opportunities and future exploration upside. The acquisition’s financing structure avoids dilution and maximizes value for existing shareholders.
Transformational scale. The transaction adds approximately 11,000 boed of production and 53.6 MMboe of Total Proved + Probable (“2P”) reserves. The acquisition results in a 3.9x increase in corporate production, a 3.7x increase in 2P reserves, and 6.2x increase in 2P reserve value.
Significant North Sea operating position. Upon closing, Tenaz will become the second largest operator in the Dutch North Sea (“DNS”). NOBV production accounts for approximately 20% of gas production in the DNS and is 87% operated by NOBV.
Overview of the acquisition. The acquired assets include substantially all of NAM’s offshore exploration and production business, including associated pipeline infrastructure and onshore processing in the Netherlands. The acquisition does not include NAM’s assets in the Ameland area.
Upstream. The upstream assets consist of a portfolio of production and exploration licenses in the DNS comprising 2,415 km2 (approximately 600,000 net acres). The licenses are in shallow water at an average water depth of 34 m, approximately 60 km offshore. Current production is approximately 11,000 boed from six hubs and two main production areas, the Joint Development Area (“JDA”) and the L02/L09 fields. Production is predominantly from the Permian-aged Rotliegend Sandstone at an average depth of 3,500 m. Base production decline rate is approximately 10%.
In addition to existing low-decline production, the acquired asset base is replete with identified workover and optimization projects, infill drilling opportunities and exploration prospects.
Capital reinvestment into the assets has been at a low level for more than a decade. As examples of limited reinvestment, only 0.5 net wells have been drilled on NOBV license interests over the past five years, and no capital investment is planned for 2024.
As a result of this historic undercapitalization of the asset base, Tenaz believes there is significant opportunity for reinvestment. An evaluation of NOBV has determined that there are several years of workover and optimization projects, at least thirty potential development drilling locations, and more than eighty exploration leads and prospects on this extensive offshore license base.
Exploration and development potential is enhanced by the presence of 3D seismic surveys over substantially all of the asset base, including a high-effort Ocean Bottom Node survey acquired on the JDA in 2022 which is still undergoing processing.
Upon closing, Tenaz plans to initiate a high-return workover program on the existing well stock. Over time, we intend to phase-in a development drilling program, and also expect to drill the most prospective of the identified exploration prospects.
Tenaz expects that this capital plan will offset base production decline and generate moderate production growth. High integrity infrastructure is largely already in place to accommodate this growth. In the current commodity environment, our capital and production plan should also generate significant free cash flow.
Reserves volumes and net present value. McDaniel and Associates (“McDaniel”) has completed an independent assessment of the reserves associated with the assets and have assigned 53.6 MMboe of Total Proved + Probable “2P” reserves.
McDaniel’s Total Proved (“1P”) and 2P reserves assessments respectively include 1.7 and 3.6 net development wells with risked production profiles, and no exploration wells. McDaniel’s evaluation projects that the existing upstream assets will have a remaining economic production life of 22 years.
Anthony Marino, President & CEO of Tenaz, stated, “This acquisition is an important step in our strategy of securing valueenhancing acquisitions that have substantial organic investment opportunities. We welcome NOBV’s workforce of highly skilled and experienced professionals who will be critical to the continued success of Tenaz. We are delighted to invest in the revitalization and sustainability of the Netherlands energy industry, and we look forward to establishing our Dutch headquarters near the existing NOBV office in the Netherlands.”
