Eni and Vår Energi Announce Agreement to Purchase Neptune Energy, Enhancing Low-Emission Operations

Eni and Vår Energi Acquire Neptune Energy, Expanding Gas-Oriented Operations in Key Regions

(IN BRIEF) Eni and Vår Energi have announced their agreement to acquire Neptune Energy Group, a leading exploration and production company with gas-oriented operations in Western Europe, North Africa, Indonesia, and Australia. Eni will acquire Neptune’s global business, excluding Germany and Norway, while Vår will directly acquire the Neptune Norway Business. The transaction aligns with Eni’s strategy of increasing natural gas production and achieving net zero emissions. It brings substantial reserves, financial performance, and increased production to Eni and Vår’s portfolios. The transaction is expected to generate synergies, value upside, and be accretive to earnings and cash flow. The completion is subject to customary closing conditions and is anticipated in the first quarter of 2024.

(PRESS RELEASE) SAN DONATO MILANESE (MILAN), 23-Jun-2023 — /EuropaWire/ —  Eni S.p.A. (BIT: ENI), an Italian multinational energy company with focus on innovation, efficiency and accessibility for all, and Vår Energi ASA (“Vår”), a publicly listed company on the Oslo Stock Exchange with its majority (63%) controlled by Eni, are pleased to announce the agreement to acquire Neptune Energy Group Limited (“Neptune”), a leading independent exploration and production company.

Neptune Energy is recognized for its exceptional portfolio of low emission, gas-oriented assets and operations in Western Europe, North Africa, Indonesia, and Australia. Founded in 2015 by Sam Laidlaw, Neptune Energy is currently owned by China Investment Corporation, funds advised by Carlyle Group and CVC Capital Partners, and certain management owners.

The acquisition will see Eni purchasing assets comprising Neptune’s entire portfolio, excluding its operations in Germany and Norway (the “Neptune Global Business”) (referred to as the “Eni transaction”). Meanwhile, Vår will directly acquire the Neptune Norway Business from Neptune through a separate share purchase agreement (the “Vår transaction”). The Vår transaction will be completed just before the Eni transaction, and the proceeds from the Norway sale will remain with the Neptune Global Business acquired by Eni. Vår Energi is a publicly listed company on the Oslo Stock Exchange and is 63% owned by Eni.

The Enterprise Value of the Neptune Global Business is approximately $2.6 billion, while the Neptune Norway Business is valued at approximately $2.3 billion. As of 31 December 2022, the net debt of the Neptune Global Business, pro forma for the sale of the Neptune Norway Business, was approximately $0.5 billion. The final net consideration for both transactions will be subject to customary closing adjustments and will be paid in cash at completion. The Eni transaction will be funded using available liquidity.

This transaction aligns with Eni’s strategic objectives of increasing the share of natural gas production to 60% and achieving net zero emissions (Scope 1+2) from the Upstream business by 2030. Eni’s focus on providing affordable, secure, and low-carbon energy to society makes the acquisition of Neptune Energy a perfect fit. Natural gas remains a vital source of energy in Eni’s pursuit of a sustainable future. Moreover, the transaction is consistent with Eni’s operating and financial framework, as well as the targets outlined in Eni’s 2023-2026 Plan, delivering enhanced earnings, cashflow, shareholder value, and remuneration upside.

Key Benefits of the Transaction:

Substantial Reserves: As of 31 December 2022, Neptune Energy reported 2P reserves of approximately 484 million barrels of oil equivalent (boe), with approximately 386 million boe net to Eni’s portfolio. About 80% of these reserves are natural gas, providing significant upside potential for additional contingent resources.

Strong Financial Performance: In 2022, Neptune Energy’s global business reported revenues of approximately $1.22 billion and EBITDAX of approximately $0.95 billion.

Increased Production: The transaction will add around 130 thousand barrels of oil equivalent per day (kboed) to Eni and Vår’s portfolios. Eni estimates that the transaction will contribute over 100 kboed of low emission production between 2024 and 2026, with more than 70% of it being natural gas. The majority of this production can be supplied to OECD markets through pipelines or liquefied natural gas (LNG).

Synergies and Value Upside: Eni expects to achieve G&A and industrial synergies worth over $0.5 billion. There are also opportunities for additional cost synergies, exploration and development, including carbon capture and storage (CCS) projects, and financial and midstream value upside.

Financial Impact: The transaction is expected to be immediately accretive to earnings and cash flow per share, as well as free cash flow positive. It is consistent with Eni’s 2023-2026 Plan, including the guidance of a net positive contribution of €1 billion from portfolio activities over the period, €37 billion of organic capital expenditure, leverage within a 10% to 20% range, and achieving a 3-4% compound annual growth rate (CAGR) in production from 2023 to 2026.

Commenting on the transaction, Eni’s CEO, Claudio Descalzi, said, ‘’This transaction delivers to Eni a high-quality and low carbon intensity portfolio with exceptional strategic and operational complementarity. Eni sees gas as a critical bridge energy source in the global energy transition and is focused on increasing the share of its natural gas production to 60% by 2030. Neptune will contribute predominantly gas resources to Eni’s portfolio. Moreover, the geographic and operational overlap is striking, adding scale to Eni’s majority-owned Vår Energi; bringing more gas production and CCUS opportunities to the remaining North Sea footprint; building on Eni’s leading position in Algeria – a key supplier to European gas markets; and deepening Eni’s presence in offshore Indonesia, supplying the Bontang LNG plant and domestic markets. We also expect the added supply to provide further optimisation opportunities for Eni’s GGP operations. Indeed, we see the transaction adding around 4 Bcm of gas supply for European consumers. A critical element of the transaction is also the low-cost supply and accretive cashflow it provides to Eni. It therefore supports our commitment to an attractive and resilient dividend and adds to the potential for share buybacks that make up the balance of the 25-30% of CFFO we have committed to distribute. The nature and challenges of the energy transition require a focused response and in particular this transaction highlights two important aspects of Eni’s financial strategy – the flexibility and optionality that our strong liquidity and low balance sheet leverage offer; and our innovative satellite model which helps to align and access dedicated capital”.

The transaction overview includes the following details:

Neptune Global Business:

United Kingdom: Neptune produced 15 kboed in 2022, primarily from the Cygnus field, the UK’s largest single gas producer. Eni’s production in the UK during the same period was 44 kboed, mainly from the non-operated Elgin Franklin and J-Block.

Netherlands: Neptune produced 18 kboed in 2022, with a focus on gas production. It operates as the largest producer in the Dutch North Sea and manages key offshore hubs, allowing efficient addition of reserves and production through infill drilling and tiebacks. Eni does not have E&P operations in the Netherlands, so the additional source of gas supply will enhance the geographical and pipeline versus LNG diversification of its midstream gas GGP operations.

Algeria and Egypt: Neptune operates the Touat field in Algeria and produced 3 kboed from the Western Desert in Egypt in 2022. Eni’s production in Algeria and Egypt during the same period was 95 kboed and 346 kboed, respectively. The transaction strengthens Eni’s leading position in Algeria, which is a significant supplier of gas to Europe.

Indonesia: Neptune produced over 20 kboed in Indonesia from the Eni-operated Jangkrik and Merakes fields, supplying gas to the Bontang LNG facility and domestic customers. Eni’s production in Indonesia in 2022 was 62 kboed.

Australia: Neptune maintains an interest in the Petrel project in the Bonaparte Basin, offshore Australia. Leveraging existing infrastructure, such as Eni’s Blacktip field, there are potential development options for Petrel.

Neptune Norway Business: In 2022, the Neptune Norway Business accounted for 58 kboed of low-cost and low-emission production, with 57% being gas or LNG. Key assets in Norway include Snøhvit, Njord, Gudrun, Fenja, Duva, Gjøa, and Fram, with Fenja, Duva, and Gjøa being operated fields. Vår Energi produced 220 kboed in Norway in 2022. The transaction brings together two organizations with extensive experience in exploration and project development, creating opportunities to create additional value while reducing emissions.

Low Carbon and CCUS Opportunities: Neptune’s portfolio in 2022 was composed of 77% gas production, demonstrating its low carbon intensity. Additionally, Neptune is advancing carbon capture and storage (CCS) projects in Norway, the Netherlands, and the UK. Eni is committed to CCS as a key decarbonization strategy, aiming for a gross capacity of 30 million tonnes per annum (Mtpa) by 2030.

The completion of the Eni transaction is subject to customary closing conditions, including the carve-out of Neptune’s operations in Germany, completion of the Vår transaction, and obtaining necessary governmental and contractual consents, FDI, and anti-trust clearances. The anticipated closing timeframe is the first quarter of 2024.

Eni was advised by HSBC as exclusive financial advisor, White & Case LLP as legal advisor, and Ernst & Young as tax and financial due diligence advisor.

Eni will host a conference call and Q&A session on June 23, 2023, at 1:00 pm CEST, featuring Claudio Descalzi (CEO) and Eni’s top management. A PDF version of the presentation will be available on eni.com at 12:45 CEST, and the live streaming will be accessible on the company’s website. Dial-in numbers for the listening mode will be provided on the Eni investor relations page: https://www.eni.com/en-IT/investors.html.

Media contacts:

Tel: +39.0252031875
Tel: +39.0659822030
ufficio.stampa@eni.com

SOURCE: ENI