- As a Chevron shareholder, I was pleasantly surprised at the $2 billion figure reported for the company's assets in Bangladesh.
- But these assets currently produce more than half of Bangladesh's total gas output - all of which is sold directly to the country's national oil company.
- Chevron already has a strong balance sheet but is targeting assets sales of $7-8 billion this year.
That's good news for shareholders, who Citi says are best positioned among the oil majors to receive dividend increases and/or share buybacks.
Reuters reported this morning that Chevron (NYSE:CVX) is in preliminary talks to see its major gas fields in Bangladesh to China's state-run Zhenhua Oil for an estimated $2 billion. As a Chevron shareholder, news of the deal was a pleasant surprise. Just what are these assets and why are they worth $2 billion?
Chevron operates three natural gas fields in Bangladesh - Bibiyana, Jalalabad and Moulavi Bazar - under production sharing contracts signed with the Government of Bangladesh in 1995. All of the gas and condensates that Chevron produces in Bangladesh is sold directly to Bangladesh's national oil company Petrobangla.
In late 2014, Chevron announced the start of production at the Bibiyana Expansion Project. The project included additional wells, two gas processing trains, and an enhanced liquids recovery facility. The project has a capacity of 300 MMcf/d natural gas and 4,000 bpd of condensate. The liquid recovery facility started up in Q1 of 2015.
In 2015, 38 producing wells in the three fields delivered net production of 720 MMcf/d natural gas and 3,000 bpd of condensate.
Chevron received a competing bid of $2.3 billion for the assets from Geo-Jade Petroleum - an independent Chinese O&G explorer. However, an executive familiar with the competition said Chevron likely picked Zhenhua Oil because it is a state-owned company and has the backing of China Reform - making a potential sale much more likely to close.
Source: Seeking Alpha