PTT Exploration & Production Pcl, Thailand’s biggest publicly listed oil and natural gas explorer, and PT Pertamina agreed to buy Hess Corp.’s Indonesian assets for $1.3 billion.
PTT Exploration, or PTTEP, and the Indonesian state-owned oil company will buy a 75 percent interest in the Pangkah oil field, located in the East Java Sea, and a 23 percent stake in the Natuna Sea A gas field in the West Natuna Sea, Bangkok-based PTTEP said today in a statement.
PTTEP has expanded its investments to 45 projects in 12 countries, including last year’s acquisition of Cove Energy Plc’s oil and gas assets in Mozambique for $1.6 billion, to diversify output. The company said in July that sales from its Zawtika project near Myanmar will begin commercial production in the first quarter of next year.
“The Indonesian projects would allow closer oversight by PTT Exploration compared with its other faraway projects such as in Canada and Africa,” Chutima Woramontri, an analyst at BNP Paribas Securities (Asia) Ltd. in Bangkok, said by phone today. “It’s a very positive move for PTT Exploration to expand its assets in Southeast Asia.”
The fields produced a net average of 15,000 barrels of oil equivalent a day during the first three quarters, New York-based Hess said today in a separate statement. The company will use proceeds to buy back shares under a previously authorized $4 billion repurchase plan. Hess has raised $6.5 billion this year from asset sales, Chief Executive Officer John Hess said Nov. 21.
The company, which has climbed more than 50 percent this year, has been streamlining its holdings after pressure from shareholder Elliott Management Corp.
PTTEP advanced 5.3 percent to 168.5 baht at the close in Bangkok, its biggest gain in two years. The stock has gained 2.7 percent this year.
The Pangkah field has daily output of 7,000 barrels of oil and 33 million cubic feet of gas, while the the Natuna Sea A field produces 220 million cubic feet of gas and 2,350 barrels of oil a day, PTTEP said in the statement. The two fields have combined reserves of about 319 million barrels of oil equivalent, it said.
The deal is fairly priced and may boost PTTEP’s petroleum output this financial year by three percent, Bualuang Securities Pcl said in a report.
PTTEP, which is paying $650 million in cash for its half of the deal, expects the Natuna Sea A project purchase to be finalized within this year and the Pangkah project to close in the first quarter of 2014.
“The pricing here, looking at the reserves and the production, are both attractive compared to recent transactions,” Trevor Buchinski, a Bangkok-based analyst at Macquarie Securities Thailand, said by phone today. “This also sets the stage for the next acquisition, Hess’s Thai assets, and it’s an early indication that the risk of PTTEP overpaying in Thailand is lower.”
Tevin Vongvanich, PTTEP’s CEO, said on Oct. 29 the company is interested in buying Hess’s assets in Thailand, according to a Reuters report. Hess has a 35 percent stake and is the operator of the Sinphuhorm field in Thailand and PTTEP owns a 20 percent stake, according to Hess’s website.
There have been $177 billion of oil and gas deals announced globally this year, according to data compiled by Bloomberg.
“The acquisition of Pangkah and Natuna Sea A is a strategic fit to PTTEP’s growth strategy of adding producing assets that contribute immediate revenue stream,” the company said in the statement.
Buying the stakes “is in line with Pertamina’s growth strategy to acquire more producing assets that provides an immediate addition to production and reserve hence increase the revenue,” the Indonesian company said in an e-mailed statement today. The company estimates its output will be about 2.2 million barrels of oil equivalent a day by 2025, with domestic and overseas operations contributing equally.