Shell Divests Gulf Of Mexico Stake To Israel’s Delek Group For Nearly $1 Billion

Delek Group Ltd. said April 11 it had struck a deal with Royal Dutch Shell Plc to acquire its stake in one of the largest deepwater fields in the U.S. Gulf of Mexico (GoM) as the Israeli independent E&P aims for global expansion.

UPDATE: Equinor Grows Deepwater Gulf Of Mexico Position With $965 Million Acquisition

Shell Offshore Inc., subsidiary of the Anglo-Dutch oil company Royal Dutch Shell, agreed to sell its 22.45% interest in the Caesar-Tonga oil field to Delek Group for $965 million. Delek said it plans to finance the acquisition using non-recourse loans from international banks against the asset, along with company funds.

The Ceasar-Tonga Field, which began production in 2012, is located 300 km south of Louisiana at a depth of 1,500 m. The field currently produces roughly a total gross of 71,000 barrels of oil equivalent per day with 90% of the output being oil.

Delek Group already boasts major finds in the East Mediterranean’s Levant Basin including the Leviathan and Tamar reservoirs with partner Noble Energy Inc. However, the company has been aiming to transform itself into a global E&P through the acquisition of new E&P assets.

“The transaction for acquisition of the rights in the Caesar-Tonga Field is a further important stage in implementing Delek Group’s strategy to expand and establish our operations on the international stage,” Asaf Bartfield, president and CEO of Delek Group, said in a statement. “This is a strategic opportunity, which provides the group access to a producing oil asset with significant proven reserves, with a strong cash flow and partnership with leading players in the global energy market.”

In addition to expanding the North Sea position it picked up through its acquisition of Ithaca Energy Inc. in 2017, Delek has also been searching for ways to materially increase its presence in the GoM, according to a November 2018 investor presentation.

In 2018, Delek Group purchased oil and gas rights in 12 federal shallow-water leases in the GoM from Gulf Slope Energy Inc. As part of its deal with Gulf Slope, Delek also agreed to finance 90% of the initial drillings last year in the Tau and Canoe prospects in exchange for 75% of the rights.

The pending acquisition from Shell includes eight wells connected by an undersea pipeline network to a production platform owned by Anadarko Petroleum Corp., which is the operator of Caesar-Tonga with a 33.75% interest in the field. Other co-owners of the asset include Equinor ASA (23.5%) and Chevron Corp. (20.25%).

The expected lifespan of the Caesar-Tonga Field is 30 more years, Delek Group said, and its interest reflects 78 million barrels of oil equivalent (2P) reserves assuming no change in the current production rate. Additionally, Delek’s share of the asset generates annual EBITDA of roughly $230 million, according to the company press release.

The completion of Delek’s transaction with Shell is subject to, among other things, the right of first refusal possessed by the field’s other co-owners, the release said.

Shell expects to close the transaction by third-quarter 2019, the company said in a separate release on April 11.

Andy Brown, the company’s upstream director, said the sale is a part of an ongoing divestment program Shell launched in January to sell around $5 billion a year.

“This transaction represents our continued focus on strategically positioning our deepwater business for growth and is consistent with our upstream strategy of pursuing competitive projects that deliver value in the 2020s and beyond,” Brown said in a statement.

Emily Patsy can be reached at epatsy@hartenergy.com.