M&A: Eni to acquire Neptune. What it means for the region
On Friday, we saw the announcement that Eni have agreed to acquire Neptune Energy for an aggregate enterprise value of $4.9 billion. Rumours had been swirling around Neptune for a while, with a merger with Harbour also mooted. Eni were first linked in late-2022 but the negotiations reportedly broke down over the price.
Who are Neptune Energy
Neptune Energy was set up in 2015, with funding from private equity backers Carlyle Group and CVC. They entered the upstream business when they acquired ENGIE's upstream oil and gas business, Engie E&P International (EPI), in 2018. At the time, Engie held 70% interest in company, with China's sovereign wealth fund CIC holding the remaining 30%. The deal was based on EPI being valued at € 4.7 billion (~US$ 5.1 billion) for 100 percent of the unit, with a transaction price of € 3.29 billion for the 70% stake. As a part of this transaction, CIC increased their shareholding in EPI to 49%.
Neptune's global portfolio includes assets in Norway, UK, Netherlands, Algeria, Egypt, Indonesia and Australia. For this article, I will focus on their assets in Asia-Pacific: Indonesia and Australia with both an overview of the assets and some of the opportunities this deal may create.
Indonesia - Kutei basin focus
ENGIE (under their previous guise as GDF Suez) entered Indonesia's upstream in 2009 when a swap deal with Eni saw them attain a 45% interest in the Muara Bakau PSC, with Eni being the operator and holding the remaining 55%. In 2015, shortly before GDF Suez were renamed ENGIE, they sold an 11.67% stake to Saka Energi, leaving them with 33.33%.
The Muara Bakau PSC is located in the Kutei basin, with ENGIE and then Neptune continuing to invest in the basin, through both acquisitions and bid rounds, always alongside Eni. Neptune's current holdings are:
I produced an article on these assets back in 2019 for my previous employer (google will lead you there "Unlocking the production potential of Indonesia: Kutei Basin"). As a quick recap: production from these assets is based around the facilities at the Jangkrik field in the Muara Bakau PSC, with the Merakes field (East Sepinggan PSC) tied-back in 2021. The gas is processed at the Jangkrik facilities before being sent onshore to Kalimantan where the majority of the gas is sent to the Bontang LNG plant for liquefaction and sale into international and domestic markets. There is plenty of potential for additional tie-backs of discovered resources including Maha (West Ganal PSC) and Merakes East (East Sepinggan PSC). In addition, the PSCs contain a number of prospects, with the an exploration well at the Geng North prospect (North Ganal PSC) reportedly planned for later this year.
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Indonesia - Potential farm-in opportunity
On completion, Eni will hold 70 to 100% interest in these assets. I can see an opportunity being created here for a potential farm-down of 20-30% in these assets. The gas-to-LNG nature (not to mention the low GHG intensity) of the assets should make them attractive to North Asian companies (Korean, Japanese, Chinese) as well as European and domestic companies. Additionally, if things fall into place, this could provide a path into the Rapak and Ganal PSCs (IDD project) that Chevron are currently looking to divest, with Eni the logical buyer (even if it is getting a bit messy).
Australia - Once grand plans but just Petrel left
GDF Suez entered Australia in 2009 when they acquired a 60% stake in the leases containing the Petrel, Tern and Frigate fields from Santos (who held the remaining 40%). The three gas fields are located in the Bonaparte basin and formed the basis of GDF Suez's proposed Bonaparte FLNG project.
However, the project never got off the drawing board and Neptune withdrew from the Tern and Frigate leases in 2019, leaving them with a 60% stake in the Petrel leases, which they then reduced to their current 54% stake.
Petrel - Potential development
There are no visible plans to develop the Petrel field, with the major challenge being the lack of route-to-market. Backfill of Darwin LNG may be one option but, with Eni now involved, there may be an option to develop the field through Eni's 100% owned Blacktip field, where they have been having some production issues. However, Eni attempted to divest their Australia assets in 2020, so their desire to invest further may be limited.
Update - 31st January 2024
Today, Eni announced the completion of this deal.