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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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Half of Kinder Morgan’s Stake in Georgia LNG Facility is Sold to Unknown Company

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.

Recent acquisitions totaling $305 million in cash bring Summit Midstream the opportunity to build up its Denver-Julesburg basin assets. Its subsidiary, Summit Midstream Holdings, concluded a deal to purchase Outrigger DJ Midstream from Outrigger Energy II and Sterling Energy Investments, Grasslands Energy Marketing, and Centennial Water Pipelines from Sterling Investment Holdings. Weld County-based Outrigger’s assets in Colorado are significant as they include a 60 MMcfd cryogenic natural gas processing plant, almost 70 miles of low-pressure natural gas gathering lines, 90 miles of high-pressure natural gas gathering lines, 12,800 horsepower of field and plant compression, and roughly 30 miles of crude oil gathering pipelines. The gathering agreements for Outrigger DJ system are comprised of long-term, fee-based contracts with a weighted average term of over 10 years. Volume throughput on the Outrigger DJ system is underpinned by acreage dedications, with a valued 310,000 leased acres from its key customers, including Mallard Exploration and other producers in the region. Moreover, the Sterling DJ assets, in Weld, Morgan, and Logan Counties, Colorado, and Cheyenne County, Nebraska, have three cryogenic processing plants with a nameplate capacity of 100 MMcfd, some 450 miles of natural gas gathering lines, 8,500 horsepower of field compression, freshwater rights, and 40 miles of subsurface freshwater delivery infrastructure.

Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.

The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.

Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.

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