Power Up: Do potential gas developments pip a merger?
Link copied to
Or at least, would do so once both companies have completed due diligence to their satisfaction.
The merger of the two companies will create a real giant that ranks up in the top tiers of global oil and gas companies.
Amidst such big news, you might think their largest competitors would keep quiet.
But perhaps in hopes of turning the narrative back to itself, Woodside Petroleum (ASX:WPL) has updated cost estimates for its giant Scarborough gas field off Western Australia.
While it has certainly put the company back on the list of topics covered around the water cooler, it isn’t all positive.
Woodside now expects the project to cost US$12 billion, about 5% higher than previous cost estimates that it had announced in November 2019.
This is due to a 3% increase in the onshore component to US$6.3bn due to required modifications to the Pluto Train 1 to enable processing of Scarborough gas and a 8% increase in the offshore component to upgrade production capacity from 6.5 million tonnes per annum of LNG to 8MMtpa of LNG and an additional well.
While cost increases are never welcome, there at least appears to be good reason for this with acting chief executive officer Meg O’Neill noting that it includes “value-accretive scope changes to deliver an approximately 20% increase in offshore processing capacity”.
The gas major added that the expected internal rate of return of the integrated Scarborough and Pluto Train 2 development is greater than 12%.
The project, which both Woodside and its partner BHP (ASX:BHP) are expecting to give the green light to later this year, should be able to supply LNG at a competitive $6.8 per million British thermal units to north Asia and is expected to deliver the first cargo in 2026.
There’s just one last thing though.
O’Neill flagged that the company has now started the formal process of selling down its interest in Pluto Train 2 and Scarborough, so expect news out on that front at some stage.
While big oil and gas players are in merger mode, coal players are also going shopping with Bowen Coking Coal (ASX:BCB) moving to acquire 90% of the Lenton joint venture from New Hope Corporation (ASX:NHC), which will turn Bowen into a multi-mine coking coal producer.
The acquisition is expected to pave the way for the company to develop a processing hub for its nearby exploration and development assets such as Broadmeadow East, Hillalong and Carborough along with third party deposits.
Bowen has been on a mini-acquisition spree. Late last month, the company announced that it was the preferred bidder for the Bluff PCI coal project.
It is not the only company snapping up projects though.
Allegiance Coal (ASX:AHQ) has just completed the acquisition of Black Warrior Minerals, giving it immediate access to a premium CSR coking coal currently sold to the Alabama power market.
The company intends to take this coal and blend it with the NPA coal it is contracted to buy from Yellowhammer Energy, and its own New Elk Blue seam coal to create an on-spec high volume coking coal product for sale on the seaborne metallurgical coal market.
Meanwhile, Atrum Coal (ASX:ATU) has completed the institutional component of its $3.2m entitlement offer to continue stakeholder consultation efforts and public fact-based campaign, baseline environment studies and general working capital.
The company issued 28.1 million shares priced at 3c each to raise about $0.84m