Mergers, oil & gas shift, and doubling down on LNG
Offshore Energy Today
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A whirlwind of activity marked the week which is now behind us, as plans for a multi-billion merger came to light once again to give birth to an oil services giant and a much larger combined offshore energy provider that would form a quartet with SLB, Halliburton, and Baker Hughes at the top of the market pyramid. One of the oil majors shed more light on its anticipated return to its roots to right the wrong turns it took too suddenly in the past, which led to its current woes. The firm will shun its previous zest for a speedy energy transition to net zero in the hopes of bringing back its glory days of high profits to bolster investors' confidence and rejoin the high earners' club. New hydrocarbon discoveries, oil and gas inroads, and high LNG growth expectations also found their way into the energy market's limelight.
The highlight of the week came from Saipem and Subsea7 , which confirmed their plans to combine their businesses, establishing a company said to have the potential to be a global leader in the energy services arena, offering a full spectrum of offshore and onshore services, from drilling, engineering, and construction to life-of-field services and decommissioning. Such a combined entity will have a higher opportunity to optimize project schedules for clients in the oil, gas, carbon capture, and renewable energy markets, with a global headcount exceeding 45,000 people, including over 9,000 engineers and project managers, in more than 60 countries.
With an expanded reach and diversified fleet of more than 60 construction vessels enhancing the combined company's ability to undertake a wide range of projects, from shallow water to ultra-deepwater operations, a full portfolio of heavy lift, high-end J-lay, S-lay, and reel lay rigid pipeline solutions, flexible pipe and umbilical lay services, and wind turbine foundation and cable lay installation capabilities, this proposed merger, if successful, is expected to foster innovation in offshore technologies, ensuring cutting-edge solutions for complex projects. The combined company will be structured into four businesses: Onshore E&C, Drilling Offshore, Sustainable Infrastructures, and Subsea7 (Offshore E&C).
The memorandum of understanding (MoU) for a full combination of the duo's respective businesses entails a cross-border merger of Subsea7 into Saipem, with Subsea7 shareholders receiving 6.688 Saipem shares for each Subsea7 share, representing a pro-forma ownership of 50-50% of the combined company called Saipem7, in which Subsea7 shareholders will receive an extraordinary dividend equal to €450 million (about $466.99 million) immediately before the effectiveness of the merger that will enable the new firm to be listed on both Milan and Oslo stock exchanges.
This proposed combination is expected to unlock approximately €300 million (around $311.33 million) annual synergies on a run-rate basis, enabling an enhanced corporate profile with a combined backlog of circa €43 billion (about $44.62 billion) and a robust financial profile with better revenue visibility and cash flow generation, improved market visibility from equity and debt investors from a larger scale and dual listing status. The respective boards of Saipem and Subsea7 and the main shareholders are in favor of this merger, thus, the pair currently anticipates submitting the final terms of the proposed combination to their respective boards of directors for approval and the entrance into the merger agreement by around mid-2025, with completion targeted in the second half of 2026.
The preliminary potential synergies represent about 14% of combined EBITDA and around 2% of combined OpEx, with further synergetic effects expected given the robust financial profile with enhanced revenue visibility and cash flow generation, improved business risk profile, and enlarged scale. Key areas of synergies encapsulate fleet optimization, including higher fleet utilization, improved geographic positioning of assets, and mission equipment enhancement; procurement boost with longer charter periods and increased buying power from the supply chain; sales & marketing upscaling with tendering processes and reducing overlap in bidding and commercial activities; alongside process efficiencies improvement through the consolidation of project execution/offshore operations in key areas.
Saipem explains that the combined company will have scale and capability to meet clients’ needs and a global presence to support clients anywhere, thanks to combined expertise to foster innovation in subsea and offshore wind technologies, ensuring cutting-edge solutions for complex projects and increased ability to optimize project schedules for clients. While the combined company will be headquartered in Milan, Italy, Offshore E&C is envisioned as a separate legal entity to be headquartered in London, UK. The completion will be subject to, among other things, the approval of the shareholders’ meetings of both Saipem and Subsea7, this latter to be also adopted with so-called whitewash majorities, obtaining the required governmental, regulatory, antitrust clearances (including FDI and FSR) and completion of steps required for listing of the combined company’s shares on both Milan and Oslo stock exchanges.
"Saipem7 will strengthen its positioning across all offshore energy segments by leveraging on the high complementarity of Saipem and Subsea7’s construction fleets," highlighted Saipem, as the combination of assets and competencies is set to optimize project execution, improve project economics, and de-risk overall project delivery.
The second highlight this week came from bp , which intends to raise its oil and gas investment bar by about 20% to $10 billion per year while cutting its previously disclosed spending for renewables and cleaner energy by over $5 billion to drive growth with this strategic reset, designed to grow free cash flow, returns, and long-term shareholder value.
Meanwhile, Shell emphasizes in its latest LNG outlook that the shipping industry is navigating "an evolving energy landscape," in which LNG continues to play "a critical role" in the sector's decarbonization efforts. The key trends shaping the sector show that the marine order book is seeing an uptick in lower-carbon fuels, which are gaining momentum, with LNG leading the charge as "a preferred fuel" for new vessel orders.
According to Shell's data, LNG demand in shipping is anticipated to more than double in the next five years based on the current order book, with main engine advancements expected to result in low methane slip engines in more than 90% of LNG-powered newbuilds, which will help improve greenhouse gas (GHG) emission performance.
The company's outlook spotlights bio-LNG‘s lower GHG intensity, underlining that this renewable fuel will play a growing role in supporting compliance with maritime regulations. Therefore, Shell concludes that these developments and an expanding network of bunkering locations enable LNG's growth as it is fast becoming "a key enabler" in the shipping industry’s decarbonization.
However, the shipping world is not the only playground for LNG, as the outlook shows that the global demand for liquefied natural gas is forecast to rise by around 60% by 2040, largely driven by economic growth in Asia, emissions reductions in heavy industry and transport as well as the impact of artificial intelligence.
While global LNG trade grew by only 2 million tons in 2024, the lowest annual increase in 10 years, to reach 407 million tons due to constrained new supply development, Shell claims that more than 170 million tons of new LNG supply are set to be available by 2030, helping to meet stronger gas demand, especially in Asia. The firm underlines that the start-up dates of new LNG projects remain uncertain.
🌊 𝐑𝐢𝐠 𝐥𝐨𝐠𝐬 𝐢𝐧 𝐨𝐟𝐟𝐬𝐡𝐨𝐫𝐞 𝐝𝐫𝐢𝐥𝐥𝐢𝐧𝐠 𝐝𝐢𝐚𝐫𝐲 🚢
◈ Sapura Energy Berhad 's Sapura Drilling has won multiple contracts with a combined value of approximately $720 million.
🛢️𝐎𝐢𝐥 & 𝐠𝐚𝐬 𝐬𝐭𝐨𝐫𝐢𝐞𝐬 𝐢𝐧 𝐠𝐥𝐨𝐛𝐚𝐥 𝐨𝐟𝐟𝐬𝐡𝐨𝐫𝐞 𝐞𝐧𝐞𝐫𝐠𝐲 𝐛𝐨𝐨𝐤𝐬 ⛽
◈ ExxonMobil and its partners, Mitsui & Co., Ltd. and Woodside Energy , intend to pour nearly $200 million into a gas project off the coast of Australia, which is designed to unlock additional hydrocarbon supply from the Gippsland Basin and bring it to the gas market.
◈ Chevron has handed over an updated reservoir development plan for a giant natural gas field project offshore Israel to the Petroleum Commissioner at the Ministry of Energy and Infrastructures to further expand the field’s capacity.
◈ The 16th package of sanctions enables the EU to bring into play a new set of measures to spoil Russia's revenue growth by targetting 74 more vessels, which puts the final tally of designated ships either been linked to the shadow fleet or pinpointed as having acted as a contributor to Russia’s energy revenue to 153. While these vessels are subject to a port ban and a ban on the provision of services, targeted export restrictions have been imposed on 53 new companies, alongside 34 firms in countries outside of Russia, that support the country’s military-industrial complex and engage in sanctions circumvention.
◈ Galp , together with its partners, NAMCOR NAMIBIA and Custos Energy, have hit another light oil and gas condensate discovery in the PEL 83 license off the coast of Namibia.
◈ Dar Al-Handasah Consultants Shair and Partners Holdings (Sidara) is eyeing a potential takeover of Wood .
◈ A ceremony to mark the cutting of the first steel for a floating storage and offloading (FSO) unit, which will be used at an oil field off the coast of Vietnam, has been held by Yinson Production , OceanSTAR Elite Group , and partners.
◈ MODEC 's new FPSO has reached its destination in Brazil's Santos Basin where it will work at an offshore field operated by @Equinor
◈ Petrobras has confirmed a record daily oil production at its offshore field in Brazil's pre-salt Santos Basin.
◈ Vår Energi has found more oil near its operated field in the Barents Sea.
◈ Eni and PETRONAS are setting the wheels in motion to establish a new firm that will encompass 3 billion boe of reserves alongside an additional 10 billion boe of potential exploration upside in Indonesia and Malaysia.
◈ ABL Group has enlarged its footprint, adding Namibia to the list of countries where work has been secured to support the local oil and gas market, alongside the African country’s energy transition.
◈ Serica Energy plc 's extension of a sanction waiver has been obtained from the United States Office of Foreign Assets Control (OFAC) for a field in the UK North Sea.
◈ As a miles-long journey has come to an end, Heerema Marine Contractors and its heavy lift vessel wrapped up activities related to the transport of an LNG booster compression module (BCM) from Indonesia to Australia, where it got put in place as part of efforts to up the gas production ante from a subsea reservoir at INPEX Australia ’s hashtag#offshore hashtag#energy project.
◈ While describing the greenfield wellhead platforms, designed and constructed by Sun Petrochemicals Pvt. Ltd. (SunPetro), as “a pivotal offshore installation project,” MarineMasters elaborates that this project involves the development of two platforms, featuring “robust” jackets with integrated boat landings and topsides.
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◈ Beacon Offshore Energy , co-owned by a subsidiary of Israel’s Navitas Petroleum , is nearing the first production from its deepwater project in the Gulf of Mexico/Gulf of America, as a floating production system has reached the Gulf Coast of Texas.
◈ TotalEnergies has moved forward with the commissioning and ramp-up efforts to unlock the full production capacity at its gas redevelopment project in the North Sea and offshore Denmark.
⚙️ 𝐋𝐍𝐆 𝐜𝐡𝐚𝐩𝐭𝐞𝐫𝐬 𝐢𝐧 𝐠𝐥𝐨𝐛𝐚𝐥 𝐞𝐧𝐞𝐫𝐠𝐲 𝐭𝐨𝐦𝐞 📊
◈ Wison New Energies has wrapped up the keel laying ceremony for a 1.2 mtpa floating liquefied natural gas (FLNG) unit destined for an Asian LNG project Genting Berhad is setting in motion offshore Indonesia.
◈ Tokyo Gas has got its hands on a 20% interest in a subsidiary of First Gen Corporation , which enables the Japanese player to acquire a stake in an offshore LNG terminal located in the Philippines.
◈ PETRONAS ' third FLNG unit, which is perceived to be 2.5 times bigger than a soccer field, is being constructed by Samsung Heavy Industries in partnership with JGC .
◈ ADNOC Group and Osaka Gas Co., Ltd. have struck a new deal by turning their previous one into a definitive agreement, which is said to be the fourth sale and purchase award for the Ruwais LNG project.
◈ LNG Canada , a joint venture company encapsulating Shell , PETRONAS , PetroChina Canada , KOGAS International Pte. Ltd. , and Mitsubishi Corporation , are laying the groundwork to begin operations by mid-2025 at its giant LNG export terminal in Kitimat, Canada’s British Columbia.
🍃𝐄𝐧𝐞𝐫𝐠𝐲 𝐭𝐫𝐚𝐧𝐬𝐢𝐭𝐢𝐨𝐧 𝐩𝐚𝐠𝐞𝐬 𝐢𝐧 𝐧𝐞𝐭 𝐳𝐞𝐫𝐨 𝐭𝐚𝐥𝐞𝐬 ☀️
◈ Equinor has picked Explicit ApS to carry out a survey of methane emissions from its entire Norwegian portfolio of assets with drones.
◈ MODEC has inked a front-end engineering and design (FEED) contract with SAMSUNG E&A for a pilot project to install a modular carbon capture technology, developed by Carbon Clean , on an FPSO unit.
◈ Expro 's new assignment will allow it to supply tubular running services (TRS) for an offshore carbon capture and storage project, which is said to be the first of its kind in the Netherlands.
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𝑴𝒆𝒍𝒊𝒔𝒂 Č𝒂𝒗č𝒊ć
Senior Editor at Offshore Energy Today, now known as Offshore Energy's Fossil Energy market
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Look to further my skill set
1moVery informative