What does Neptune, the British company bought by Eni, do?
Eni acquires the British oil company Neptune for 4.9 billion dollars: it is one of the largest deals in the oil & gas sector, apparently going against the market trend. But Descalzi is convinced of the role of gas and carbon capture
About eight months after the first expressions of interest, the Italian oil company Eni announced today the purchase – together with the Norwegian subsidiary Vår Energi – of the British company Neptune Energy, active in the oil & gas sector, for 4.9 billion of dollars. This is the largest economic transaction in the European hydrocarbon industry for almost a decade. Closing is scheduled for the end of March 2024.
Neptune is headquartered in London and has oil and gas production operations in eight countries: the UK, Norway, the Netherlands, Germany, Algeria, Egypt, Indonesia and Australia.
WHAT THE OPERATION INVOLVES
The agreement provides for Eni to acquire almost 100% of the assets of Neptune for 2.6 billion dollars. The only exceptions are the operations in Norway, which will instead be absorbed by Vår (of which Eni owns 63 percent) at a price of 2.3 billion, and those in Germany, which are not included in the agreement.
WHY THE ENI-NEPTUNE DEAL IS IMPORTANT
This is a significant transaction not only for its economic value, but also because – as the Financial Times pointed out – for some time now European oil companies have generally been more oriented towards the sale of assets linked to fossil fuels rather than their purchase: thus in fact, by doing so, they get rid of the most polluting activities and finance the transition to low-carbon sources and forms of energy, more consistent with the ecological transition.
Not surprisingly, in the press release Eni wanted to specify that "the production of Neptune is competitive in terms of cost and has a low level of emissions".
French oil company TotalEnergies was also interested in acquiring Neptune, according to Bloomberg sources.
THE EXPLANATION OF DESCALZI
Interviewed by the Financial Times , the CEO of Eni, Claudio Descalzi, added that a large part of Neptune's oil & gas portfolio is located within or near the European market: in this way, emissions related to transport are reduced of the extracted hydrocarbons.
“It is clear that the trend is to acquire renewable energy or other green [projects],” he said, “but this is a deal that is in line with our transition path.”
Eni has made a commitment to achieve carbon neutrality (ie the net zeroing of its greenhouse gas emissions) by 2050, but does not see natural gas as contradictory to the ecological transition path. In fact, according to the company, natural gas – the least emitting fossil fuel – will continue to be consumed in parallel with the growth of renewable capacity because it makes it possible to compensate for the production intermittence of wind and photovoltaic plants, which depend on weather conditions. Furthermore, gas will be able to replace the thermoelectric capacity with oil and above all with coal, which is much more polluting.
Eni wants natural gas to account for 60 percent of its production by 2030. According to analysts consulted by Reuters , the deal with Neptune will strengthen ENI's gas division and increase its role as supplier to Europe in this phase of replacement of flows from Russia.
WHO ARE THE OWNERS OF NEPTUNE
49 percent of Neptune is owned by the Chinese state sovereign wealth fund China Investment Corporation; the remainder is divided between the private equity groups Carlyle (30.6 percent) and CVC Partners (20.4 percent). It was founded in 2015 by Sam Laidlaw, former CEO of British energy services company Centrica.
Neptune's production is approximately 135,000 barrels of oil equivalent; three quarters of this volume is represented by natural gas. 10 per cent of output comes from British waters.
Bob Maguire, general manager of Carlyle, told the Financial Times that since 2017 (date of purchase of the company from the French ENGIE for 3.9 billion) the shareholders of Neptune have invested more than 4 billion dollars to broaden its operational base, reduce carbon intensity and develop carbon capture and storage capabilities (a technology that allows, as the name suggests, to capture CO2 and store it underground or exploit it to increase the productivity of the field).
RETHINKING THE IPO
Neptune's owners were working on an initial public offering for the company last year, but the project was shelved due to little interest from the market, increasingly reluctant to invest in hydrocarbon exploitation.
This morning the shares of Eni – controlled by the Ministry of Economy, both directly and through Cassa depositi e prestiti, with 32.3 percent – lost 1.5 percent.
THE BILLS
In 2022, Neptune reported net income of $924.4 million from $4.6 billion in revenues, with net debt of $1.7 billion. Since 2018, shareholders have received dividends of 2.7 billion.
WHAT NEPTUNE DOES WITH CARBON CAPTURE (AND WHAT ENI DOES)
Neptune is working on the development of carbon capture and storage projects in the UK and the Netherlands with the aim of storing over 9 million tonnes of CO2 per year in its depleted deposits. If the target were to be met, the amount of CO2 sequestered by the company would be higher than that emitted by its operations and the use of its fuel.
Eni is working on two carbon capture projects in the UK (HyNet North West and Net Zero Teesside) and one in Italy, in Ravenna.
WHAT CHANGES FOR VAR AND FOR LNG
By acquiring the Norwegian operations of Neptune, Vår – which concentrates its activities in the Barents Sea, north of Norway – will get a 12 percent stake in Hammerfest LNG, the only large liquefied gas (LNG) plant in Europe.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/eni-neptune/ on Fri, 23 Jun 2023 13:30:42 +0000.