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WoodMac Sees US$32B M&A Shakeup In Australia’s Oil & Gas

Australia’s upstream oil and gas sector is set for a major mergers and acquisitions (M&A) shake-up, with US$32 billion worth of assets potentially changing ownership over the next few years, energy consultancy Wood Mackenzie said in a report.

Following several significant deals last year, 2019 has been relatively quiet so far, but WoodMac believes that “an M&A shake-up could be on the horizon.” This shake-up could primarily involve international oil companies rationalizing and selling their Australian assets, smaller players consolidating, and ownership changes in Australia’s liquefied natural gas (LNG) infrastructure.   

In international oil companies (OICs) divesting from Australian assets, the two immediate candidates could be Italy’s Eni and U.S. ConocoPhillips, according to Wood Mackenzie.

Eni is a shareholder in the Bayu-Undan field operated by ConocoPhillips, but the field is close to depletion and is expected to stop producing gas and condensate between 2021 and 2023, ConocoPhillips says.

“The undeveloped gas assets, Evans Shoal and Blacktip, offer limited potential when Bayu-Undan ceases in 2022, and the Italian player may prefer to focus on more attractive opportunities in the Middle East and Mozambique,” David Low, Senior Research Analyst, Australasia Upstream at Wood Mackenzie, said.  

For ConocoPhillips, word is that the U.S. major could be considering selling its share in the Darwin LNG.

According to WoodMac, by selling Darwin LNG, ConocoPhillips would free up capital for buybacks and re-investment in U.S. shale, which has been the focus of its strategy recently. 

Other M&A shake-ups in Australia could involve consolidation of smaller players, especially companies exposed to rising east coast gas prices. Wood Mackenzie sees Cooper Energy, Senex Energy, Comet Ridge, and Galilee Energy as potential M&A targets.

Finally, in LNG infrastructure, the energy consultancy believes that “a change in ownership of the downstream facilities could breathe new life into several stalled upstream projects.”

Earlier this month, a proposed acquisition in Australia’s power sector made headlines. Oil major Shell staked a claim in the sector by making a US$419-million (A$617 million) takeover offer for the country’s second-largest energy retailer to businesses, ERM Power.

By Tsvetana Paraskova for Oilprice.com

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