Delek Group to acquire Shell’s stake in Caesar Tonga oil field for $965m

Oil and gas industry news : Delek Group has agreed to acquire a stake of 22.45% in the producing Caesar Tonga oil field in the US Gulf of Mexico from Royal Dutch Shell’s subsidiary Shell Offshore for $965 million in an all-cash deal.

The transaction will mark the exit of Shell from the Caesar Tonga oil field, which has been in production since 2012. Other partners in the deepwater field are Anadarko Petroleum, the operator with 33.75% stake, Equinor with 23.5% stake and Chevron with 20.25% stake.

Currently, the Caesar Tonga oil field has a production of nearly 71,000 barrels of oil equivalent per day, with 90% of it being oil.

Royal Dutch Shell upstream director Andy Brown said: “This transaction represents our continued focus on strategically positioning our deep-water business for growth and is consistent with our Upstream strategy of pursuing competitive projects that deliver value in the 2020s and beyond.

“The sale will contribute to Shell’s ongoing divestment programme and allow us to direct resources to the areas where we see the most value in the longer term.”

Delek Group to acquire Shell’s stake in Caesar Tonga oil field for $965m. Image courtesy of Petroleum man1 at FreeDigitalPhotos.net.

Located 300km south of Louisiana coast in the Green Canyon area in a depth of 1,500m, the field has eight wells connected by an undersea pipeline network to a production platform owned by Anadarko, which delivers the oil and gas via an existing pipeline to the Louisiana and Texan coasts.

As part of the deal, Delek Group has agreed to enter into a long-term off-take agreement with a Shell affiliate, called Shell Trading (US), for the oil produced from the Caesar Tonga oil field for a period of 30 years at market prices or prices matched to third party offers.

According to Delek Group, the Caesar Tonga field has an expected life of 30 more years. The Israeli conglomerate’s share of reserves in the field is 78 million barrels of oil equivalent (2P) reserves.

Delek Group president & CEO Asaf Bartfeld said: “The transaction for acquisition of the rights in the Caesar Tonga field is a further important stage in implementing Delek Group’s strategy to expand and establish our operations on the international stage. This is a strategic opportunity, which provides the Group access to a producing oil asset with significant proven reserves, with a strong cash flow and partnership with leading players in the global energy market.

“This activity, alongside the oil and gas exploration activity we are carrying out in the North Sea and the Gulf of Mexico, gives added emphasis to the Group’s position in the international energy market.”

The deal is subject to various contingencies, with the most important being the right of first refusal held by Anadarko, Equinor and Chevron. Also subject to regulatory approvals, the transaction pertaining to the Caesar Tonga oil field is expected to be completed by the end of the third quarter of 2019.