CenterPoint Energy makes another divestment deal for hundreds of millions of dollars

Houston-based CenterPoint Energy Inc. (NYSE: CNP) will sell its natural gas retail business to a private equity firm for about $400 million, according to a Feb. 24 press release.

Energy Capital Partners LLC is buying CenterPoint Energy Services Inc. in the deal, which is expected to close in the second quarter of 2020. CenterPoint plans to use the net proceeds to pay down debt. The deal comes just days after the departure of the company’s CEO and shortly after another multimillion-dollar divestment was announced.

New Jersey-based ECP has an office in Houston and specializes in energy infrastructure projects. Houston-based CES has about 300 employees. It provides natural gas sales, storage and supply plus other energy-related services to about 30,000 commercial and industrial customers, utilities and municipalities across more than 30 states, per the release.

As part of the deal, CES and Shell Energy North America (US) LP will enter into a long-term preferred supply agreement in which the latter company will provide gas supply and collateral support and receive equity warrants.

“The sale of our gas retail business further positions CenterPoint Energy to focus on the long-term performance of our core electric and natural gas utility businesses,” John W. Somerhalder II, interim president and CEO of CenterPoint Energy, said in the release. “At the same time, this sale will strengthen our balance sheet and improve our business risk profile.”

This is the first announcement CenterPoint has made with Somerhalder at the helm. Just days earlier, previous President and CEO Scott Prochazka abruptly departed after leading the company for six years. His departure came just days after the Texas Public Utility Commission approved a $13 million rate hike for CenterPoint. The company initially sought a $161 million increase.

“When (the CES deal is) combined with our recent agreement to sell Miller Pipeline and Minnesota Limited, two businesses that comprised our infrastructure services segment, we expect our utility earnings contribution to approach 90 percent over the next several years,” Somerhalder added.

Earlier this month, CenterPoint announced the deal to sell Miller Pipeline and Minnesota Limited to Atlanta-based PowerTeam Services LLC for $850 million. The subsidiaries — which CenterPoint acquired in its multibillion-dollar acquisition of Indiana-based Vectren Corp. — are natural gas distribution and transmission pipeline contractors that employ about 7,500 people combined.

When the Vectren deal was announced in April 2018, it was valued at roughly $5.98 billion plus the assumption of Vectren’s debt, which was expected to be about $2.5 billion. Upon closing the deal in February 2019, CenterPoint had assets totaling $29 billion, an enterprise value of $27 billion and approximately 14,000 employees. The company now has nearly $35 billion in assets, and it serves customers in nearly 40 states.

CenterPoint Energy is represented in the CES sale by Goldman Sachs & Co. LLC as exclusive financial adviser and Akin Gump Strauss Hauer & Feld LLP as legal counsel. Latham & Watkins LLP is serving as legal counsel to Energy Capital Partners, and BNP Paribas is providing a committed borrowing base facility.

 

By Olivia Pulsinelli – Assistant Managing Editor

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2020/02/24/centerpoint-energy-makes-another-divestment-deal.html

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Houston LNG co. to sell South Texas pipeline project to Enbridge

Houston-based NextDecade Corp. (Nasdaq: NEXT) has reached a deal to sell its Rio Bravo Pipeline Company LLC to Canada-based midstream giant Enbridge Inc. (NYSE: ENB) for up to $25 million in cash.

The proposed Rio Bravo Pipeline would transport 4.5 billion cubic feet per day of natural gas from the Agua Dulce area to NextDecade’s proposed Rio Grande LNG export facility in Brownsville, Texas. In September 2019, the companies announced a memorandum of understanding to jointly pursue the development of the Rio Bravo Pipeline and other natural gas pipelines.

Now, Enbridge has agreed to own 100 percent of the pipeline company and assume all responsibility for the development, financing, construction, and operations of the Rio Bravo Pipeline. Enbridge will pay NextDecade $15 million when the deal closes and the rest when NextDecade makes a final investment decision on its Rio Grande LNG export facility. The deal is expected to close in the first quarter of 2020, and NextDecade anticipates making a final investment decision in 2020.

NextDecade will retain its rights to transport natural gas on the Rio Bravo Pipeline for at least 20 years to supply its Rio Grande LNG facility.

“This agreement with Enbridge further enhances our commitment to our global LNG customers, natural gas suppliers and other stakeholders to deliver our Rio Grande LNG project on time and on budget,” Matt Schatzman, NextDecade’s chairman and CEO, said in a press release. “As one of North America’s leading energy infrastructure companies, Enbridge brings extensive natural gas pipeline experience to execute the Rio Bravo Pipeline, and we are delighted to have them involved in supporting the delivery of our Rio Grande LNG project.”

The 27 million-tons-per-annum Rio Grande LNG terminal is expected to include gas treatment, liquefaction, and other supporting facilities and infrastructure. The terminal and its associated Rio Bravo Pipeline could amount to more than $15 billion of investment in Cameron County and are expected to create more than 5,000 jobs, according to an earlier press release.

 

By Olivia Pulsinelli – Assistant Managing Editor

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2020/02/14/houston-lng-co-to-sell-south-texas-pipeline.html

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BP’s U.S. shale division on track to hit $1B in cash

U.S. shale oil company BPX Energy will be generating $1 billion in annual cash flow next year for its parent company, BP Group PLC, and it easily surpassed the $90 million synergies expected after its $10.3 billion acquisition of Texas oil field assets.

BP (NYSE: BP) outlined the 2019 results of BPX Energy as part of London-based energy giant’s 2019 fourth-quarter earnings call Feb. 4.

BPX Energy is the Denver-based division overseeing onshore, continental U.S. oil and gas exploration and production. It was created with BP’s acquisition of mining giant BHP Billiton’s oil and gas division, a deal which closed in late 2018 and was the largest acquisition by BP in 20 years.

The division was able to find $240 million in savings from the newly bought Texas assets, some of it from reducing productions by 10 percent, the company said. The savings should swell to $400 million by the end of this year, helping BPX Energy hit its lofty free-cash flow projections, said Brian Gilvary, CFO of BP.

“The synergy number is significantly higher than what we first set,” he said. “Everything we see gives us absolute confidence in that $1 billion.”

BPX Energy employs about 200 people in Denver and hundreds more people in Houston, Oklahoma City and across the regions where it operates wells.

Before the Denver division was created, BP’s onshore business in the continental U.S. had focused on natural gas production, and it has operated for years in the San Juan Basin area of southwest Colorado and in southern Wyoming.

The acquisition from BHP Billiton bought it 500,000 acres of oil and gas assets in Texas’ Permian Basin, Haynesville and Eagle Ford oil fields.

It shifted focus in the U.S. away from natural gas to unconventional crude oil and associated liquids.

On Feb. 4, the company said it has scaled down work in the Haynesville oil fields in Texas to focus solely on the Permian and Eagle Ford areas.

BPX Energy produced an average of 124,000 barrels of crude oil and natural gas liquids per day in 2019, more than double the crude oil and liquids production it notched in 2018 before the BHP Billiton acquisition.

Counting 2.175 billion cubic feet of “dry” natural gas production, BPX Energy produced the equivalent of 499,000 barrels daily in 2019, a 43 percent jump in overall oil, gas and liquids production compared to the year before.

BPX Energy’s production is expected to decline in 2020, largely because it’s selling natural gas-producing assets to focus on its West Texas crude oil and liquids business, which has higher profit margins than natural gas, the company said.

“We estimate the impact of divestments to be in the range of 200,000 to 250,000 barrels of oil equivalent a day in 2020,” Gilvary said, noting more than half of that volume will be reductions in its dry natural gas production as a result of divestments.

He explained BP sold or is selling about $9 billion in assets — including BPX Energy natural gas operations — mostly to private equity buyers, Gilvary said.

BP had, when it acquired the Texas oil assets for BPX Energy, forecast selling $10 billion in assets to offset what it spent. That was nearly completed in 2019. BP projects divesting another $5 billion assets in coming months.

By Greg Avery – Reporter

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2020/02/06/bps-u-s-shale-division-on-track-to-hit-1b-in-cash.html

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Texas energy data wrap: Oil and gas cos. face ratings downgrades in 2019

One of the big three credit ratings agencies reported a downward trend in the ratings of oil and gas companies throughout 2019 — and it reached a fever pitch during the fourth quarter. Read more about that and other data points to know in Texas energy this week.

Credit ratings

Moody’s Corp., one of the big three corporate credit ratings agencies, gave out more credit downgrades than upgrades to oil and gas companies for the fifth consecutive quarter in the final quarter of 2019, according to a report published by the firm on Jan. 31. The fourth-quarter downgrades vastly outnumbered the upgrades during that period, marking an acceleration of a trend that has been present since Q4 2018. The firm downgraded the credit rating of 15 companies during the fourth quarter, compared to two upgrades.

“Volatile oil prices throughout 2019 and natural gas prices that steadily declined in the second half of the year led speculative-grade investors to shun all but the strongest oil weighted companies, increasing default risk for companies that already had low ratings,” Moody’s said in the report.

Texas jobs

Texas accounted for 40 percent of all oil and gas jobs in the U.S. during 2019, according to a report by the Texas Independent Producers and Royalty Owners Association. There were a total of 361,271 direct oil and gas jobs in Texas in 2019, up 5,550 from the prior year. Those jobs paid an average wage of $132,104 per year, higher than the national average oil and gas pay of $114,745 annually.

Oil and gas prices

NYMEX crude futures cost $53.48 per barrel on Jan. 28, according to the most recent data available from the U.S. Energy Information Administration. That marks a significant decline since highs in the $63-per-barrel range seen at the beginning of the month. Natural gas futures reached $1.829 per million British thermal units Jan. 30.

Rig count

The Texas oil and gas rig count decreased again in the week that ended Jan. 31, falling by two to land at 395 at the end of the week, according to data published by Houston-based Baker Hughes Co. (NYSE: BKR). That’s down 119 rigs from the comparable date in 2019. The North American rig count was down by a single rig to end the week at 1,037. That’s 251 rigs lower than the prior year date.

By Joshua Mann – Senior Reporter

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2020/02/03/texas-energy-data-wrap-oil-and-gas-cos-face.html

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