Thailand's national oil company PTTEP acquired Murphy Oil’s Malaysian portfolio for US$2.1 billion to boost production volumes, marking the largest regional deal in years.
The all-cash deal, is subject to an additional US$100 million contingent payment based on certain exploration drilling results up to October 2020. PTTEP said the deal will promptly increase sales volumes by 15 per cent and operating cash flow upon acquisition completion.
The acquisition includes five petroleum exploration and production projects – the Sabah K project, the SK309 & SK311 project, the Sabah H project, the SK314A project and the SK405B project. The acquisition will be funded by PTTEP’s available cash on hand and is expected to complete by the end of second quarter of 2019.
Phongsthorn Thavisin, PTTEP president and CEO said: “The acquisition is highly significant to PTTEP’s growth in both the short and long term, strengthening our business in alignment with the strategic plan. We expect that it will boost up net sales volume around 48,000 barrels of oil equivalent per day (BOED) immediately.”
The five oil and gas projects are located in shallow and deep water off Sarawak and Sabah. Projects in the producing phase include the Sabah K project and the SK309 & SK311 project, in which PTTEP will become the operator.
Both are considered to be among major projects with the gross production volume of approximately 100,000 BOED. The Sabah H project is in the development phase with a plan to commence the first gas production in the second half of 2020, supplying 270 million cubic feet per day (MMSCFD) to PETRONAS’ Floating Liquefied Natural Gas 2 project.
Combining these three projects, gross production volumes under PTTEP’s operation will become 140,000 BOED in the next four years. Meanwhile, the SK314A project and the SK405B project are under the exploration campaigns.
Alex Siow, research analyst at Wood Mackenzie said: "The deal underscores Murphy's strategic pivot to the US Gulf of Mexico, US unconventionals and Latin America exploration, and brings to an end Murphy's 20 year involvement in Malaysia, during which time it discovered and developed the country's first deepwater oil field, Kikeh.
"Like many Asian national companies, PTTEP suffers from a maturing domestic portfolio. To improve its production outlook the company has been on the hunt for licence extensions and counter-cyclical M&A opportunities, with a focus on Southeast Asia.”
"Murphy's Malaysian assets strengthens PTTEP's near-term production profile, and reinforces its "Coming Home" strategy, following its winning bids on the Erawan and Bongkot contract extensions in late-2018. The deal also provides exposure to important growth resource themes – deepwater and LNG – which the company has identified as core,” Soiw added.
Meanwhile, PTTEP HKO together with PETRONAS Carigali Sdn. Bhd. also signed Production Sharing Contracts with Petroliam Nasional Berhad (PETRONAS) for exploration and production rights of two offshore blocks, PM407 and PM415, in shallow waters off Peninsular Malaysia under Malaysia 2018 Bidding Round.
Under the term of agreements, PTTEP HKO will be the operator of the two blocks with 55 per cent participating interest in Block PM407 and 70 percent in Block PM415 while PETRONAS Carigali holds 45 per cent interest in Block PM407 and 30 percent in Block PM415. Work commitments are to conduct 3D seismic surveys and exploration drilling of two wells for PM407 while carry out exploration drilling of two wells for PM415.
PTTEP said the award is in line with its strategy to grow investments in Southeast Asia to accommodate long-term growth.