December 2016, Vol. 243, No. 12

In The News

In the News

GE, Baker Hughes Creating New Oilfield Technology Company

GE and Baker Hughes plan to combine GE’s oil and gas business with Baker Hughes to create a world-leading oilfield technology provider with an enlarged mix of service and equipment capabilities.

The “New” Baker Hughes will be a leading equipment, technology and services provider in the oil and gas industry with $32 billion of combined revenue and operations in over 120 countries.

Baker Hughes shareholders will receive a one-time cash dividend of $17.50 per share and 37.5% of the new company. GE will own 62.5% of the company. The transaction is expected to close in mid-2017. The $7.4 billion contributed by GE to the new partnership will fund the cash dividend to existing Baker Hughes shareholders.

“As we go forward, this transaction accelerates our capability to extend the digital framework to the oil and gas industry,” said Jeff Immelt, chairman and CEO of GE. “An oilfield service platform is essential to deliver digitally enabled offerings to our customers.”

The new company will create the second-largest player in the oilfield equipment and services industry, trailing Schlumberger. GE’s portfolio of oil and gas manufacturing and technology solutions spanning across subsea and drilling, rotating equipment, imaging and sensing will merge with the Baker Hughes portfolio in Drilling & Evaluation and Completion & Production. According to a joint news release, “The combined company will be moving beyond oilfield services and into oil and gas productivity solutions.”

The new Baker Hughes will have dual headquarters in Houston and London. Immelt will be chairman of the Board of Directors and Lorenzo Simonelli, president and CEO of GE Oil & Gas will be president and CEO. Martin Craighead, Baker Hughes chairman and CEO, will be vice chairman of the board.

The remainder of the executive leadership team will be a combination of existing leaders from both GE and Baker Hughes. The new board will consist of nine directors: five of whom, including Immelt, will be appointed by GE and four, including Craighead, will be appointed by Baker Hughes.

Shell Selling Canadian Shale Assets for $1 Billion

Royal Dutch Shell agreed to sell off Canadian shale assets to Tourmaline Oil for $1.04 billion, its latest in a string of transactions aimed at shedding assets to make room for its recently acquired BG Group. Shell’s 206,000 net acres in Western Canada produce 25,000 barrels of oil equivalent a day, about 85% natural gas. Shell said the deal could close in the fourth quarter. Shell plans to sell off $30 billion in assets as it integrates BG Group.

Investment bank Tudor, Pickering, Holt & Co. said it believes the rest of Shell’s assets in Western Canada would be worth $2 billion if oil prices reach $70/b and natural gas prices rose.

Washed-Out Bridge Caused Pipeline Rupture, Gasoline Spill

A bridge washed out by flooding traveled the length of a football field and ruptured a pipeline in mid-October, spilling about 55,000 gallons of gasoline into a Pennsylvania creek, pipeline officials said. An “object of extreme destructive force” severed the 8-inch pipeline under Wallis Run in Lycoming County, Sunoco Logistics said in a news release.

A storm dumped up to 7 inches of rain on areas in western and central Pennsylvania, wreaking havoc on rural communities. Flooding washed away two homes and damaged hundreds of others, while high winds sent a tree crashing into a house, killing a man. The floodwaters swept away a bridge in Gamble Township, at the confluence of Wallis Run and Loyalsock Creek.

“Given the position of the pipe and the location of the bridge before and after the event, it’s clear that the bridge was responsible for the damage to the pipe,” David R. Chalson, Sunoco Logistics senior vice president for operations.

The pipeline, which carries gasoline, diesel and home heating oil, was installed in 1994 5 feet under the stream bed, according to the company. Sunoco plans to replace a 500-foot section of pipe and bury it 25 feet under the streambed. Water monitoring showed no effect to drinking water supplies.

Crimson Gulf’s Pipeline Network Continues to Expand

Crimson Gulf announced its affiliate, Crimson Louisiana Midstream, acquired the HLS and Anchorage to Krotz Springs Pipeline Systems from ExxonMobil Pipeline. The pipelines collectively span 177 miles, expanding Crimson’s capacity to transport crude oil in the region.

Larry Alexander, president of Crimson Gulf, said, “Crimson Gulf will continue to identify the right investment opportunities that support healthy expansion and provide transportation options for crude oil customers in South Louisiana and the Gulf of Mexico.”

The HLS system includes 144 miles of pipeline from Chevron’s Empire Terminal, connecting the South Louisiana HLS crude sources to St. James, LA. The Anchorage to Krotz Springs Pipeline System has 33 miles of pipeline, connecting Anchorage, LA to Alon’s Krotz Spring Refinery.

Deal Creates New Midstream Platform in North America

American Midstream Partners will acquire JP Energy Partners LP to expand operations in North American basins including the Permian, Gulf of Mexico and Eagle Ford.

The combined partnership will have an estimated enterprise value of $2 billion and creates a broad midstream platform in North America that will own and operate assets ranging from natural gas pipelines to storage capacity. The expanded operations create a more diverse footprint in the North American basins and increase potential for third-party acquisitions, according to the statement.

“Essentially, it boils down to bigger is better,” Poe Fratt, an analyst at D.A. Davidson & Co., told Bloomberg “These companies with high costs of capital need to figure out how to lower that, and merging is one way to potentially do that.”

The new company comprises over 3,100 miles of gathering and transportation pipeline, a 13.9% stake in an offshore floating production facility and the third-largest U.S. wholesale propane business. ArcLight Capital Partners, the sponsor of both American Midstream and JP Energy, will combine the general partners of the two companies.

Enbridge Reducing Work Force 5% in Canada, U.S.

Enbridge is cutting hundreds of jobs across its operations following a company-wide organizational review. Canada’s largest pipeline operator said Oct. 19 it has eliminated about 370 positions in Canada and about 160 in the U.S., comprising 5% of its more than 11,000 person staff. The company said cuts stemmed from an organizational review launched earlier in the year, well before it announced the $37-billion takeover of Spectra Energy Corp.

The Spectra deal isn’t expected to close until 2017, but the company is hoping to achieve about a half billion dollars in annual efficiencies, which could include job cuts, if the deal goes through. Enbridge spokeswoman Suzanne Wilton said the review focused on what the company needed to do to achieve growth and diversification and allow it to capitalize on opportunities. The company made a similar 5% cut in November 2015.

FMC Technologies Cuts 1,000 Jobs, More Coming

Oilfield equipment maker FMC Technologies warned that more job cuts are on the way through the end of the year after eliminating another 1,000 jobs in the third quarter. Houston-based FMC, which focuses primarily on offshore energy services, said it is reducing costs as it prepares for its merger early next year with Paris-based Technip.

FMC Chief Financial Officer Maryann Mannen said the company’s surprising profitability in the third quarter was in part due to its “aggressive restructuring” efforts. The company confirmed the cuts included about 175 Houston jobs in the third quarter. Within the last two years, FMC has cut close to 5,200 workers – more than 25% of its workforce – and now numbers about 14,500 employees, 1,000 fewer than  three months ago.

DTE Energy Closes Purchase of Natural Gas Midstream Assets

DTE Energy recently completed the $1.3 billion purchase of midstream natural gas assets in Pennsylvania and West Virginia. The acquired assets are in a highly productive area of the southwest Marcellus/Utica region and have significant expansion potential. The completed acquisition included:

• 100% of Appalachia Gathering System (AGS) from M3 Midstream

• 40% of Stonewall Gas Gathering (SGG) from M3 Midstream

• 15% of SGG from Vega Energy Partners.

Energy companies in the Midwest, including DTE, are transitioning much of their electrical generation capacity from coal to natural gas, and the acquisition supports the move toward a lower-carbon future. The new natural gas infrastructure will complement DTE’s existing gas midstream business, provide growth potential and expand the company’s footprint.

EIA Predicts Rising Heating Bills for Winter

U.S. consumers are likely to pay the highest winter natural gas prices in six years, with colder weather leading to higher consumption and bills up 22% from a year ago, government forecasters said recently. The increase would largely be a return to normal, a winter after historically warm temperatures.

Southern Utes Encouraging Pipeline Development

While the Standing Rock Sioux have drawn considerable media coverage for their fight against the Dakota Access Pipeline project, the Southern Utes have attracted scant attention for their 15-year push to make it easier to drill on Indian land. Their goal: Extend financial opportunities that have already given them control of 1,600 wells across four states, while helping to make them one of the richest tribes in the U.S.

“Without a prolonged effort to take control of our natural resources, the Southern Ute Indian Tribe would not be the economic powerhouse it is today,” Tribal Council Treasurer James Olguin told lawmakers during a recent congressional hearing, “We are the best protectors of our own resources and the best stewards of our own destiny.”

Since 2012, the tribe has spent $1.6 million lobbying Washington to ease energy permits, ensure tribal sovereignty and lighten U.S. Interior Department rules on fracking and methane emissions. The Southern Utes met with lawmakers in Santa Fe, NM to argue for new laws loosening federal control over their drilling operations. They were joined by representatives of the Navajo Nation, the largest U.S. tribe, and the Arctic Slope Regional Corp.

Atmos Energy Sells Energy Marketing to CenterPoint

Atmos Energy will sell all of the equity interest in Atmos Energy Marketing to CenterPoint Energy Services. The transaction will include the transfer of 800 delivered gas customers and AEM’s related asset optimization business at a price of $40 million plus working capital at the date of closing. The sale is expected to close in early 2017.

The proceeds from this transaction will be redeployed to fund infrastructure investment in the regulated business. Once the sale is complete, Atmos Energy will have fully exited the nonregulated gas marketing

Dominion Midstream to Acquire Questar Pipeline

Dominion Midstream Partners and Dominion Resources finalized an agreement in which Dominion Midstream will acquire Questar Pipeline from Dominion for $1.725 billion, including $435 million of indebtedness of Questar Pipeline. The acquisition has an anticipated effective date of Dec. 1.

Questar owns and operates regulated natural gas transmission and storage assets in Colorado, Utah and Wyoming. Dominion is one of the nation’s largest producers and transporters of energy with 26,000 MW of generation, 14,400 miles of natural gas transmission, gathering/storage pipeline and 6,500 miles of electric transmission lines. Dominion serves over 6 million utility and retail energy customers.

Lyondell Refinery Gets Bids from Aramco, Valero, Suncor

Reuters reports at least three firms including Saudi Aramco, have bid over $1billion for LyondellBasell Industries NV’s refinery in Houston. Aramcoi was initially seen as the front-runner among bidders that included Valero Energy Corp and Suncor, sources said, though it is unclear if that is still the case.

Aramco bid $1.5 billion after an initial bid of $1.2 billion, sources said. Aramco may look to boost U.S. refining capability to compensate for capacity it is losing as it breaks up a joint venture with Royal Dutch Shell.

Canadian crude producer Suncor also bid around about $1.2 billion, and San Antonio-based refiner Valero bid $900 million. Lyondell has not stated publicly what it considers the plant to be worth, but a source familiar with negotiations said the refinery could fetch $2 billion.