A widely expected move, Exxon Mobil Corporation (NYSE:XOM) will operate the downstream and ENI will operate the upstream, including Coral FLNG. The consideration was US$2.8bn cash for a net 25% stake. This is unlike certain other recent deals which link cash payments to de-risking milestones (FEED, FID 1st LNG…).
Credit Suisse assumes Coral (3.6MTpa) will sanction this year. The firm assumes the onshore will target 2019 FID, the question is how many trains can you sell into one market window. Credit Suisse argues 2 is possible, 4 is too much of any market window. If one assumes each onshore train requires 5Tcf then the consideration = US$2.5/boe for 5 trains and US$4.4/boe for 3 trains. In Credit Suisse's ENI model, the firm needs to input a 9% WACC, a 13.5% slope, US$65/bbl crude with 2 onshore trains sanctioning in 2019 and a further 2 in 2021 to generate US$2.8bn.
Credit Suisse forecasts a market window of 20MTpa by 2025. The firm assumes that XOM works to mature a 2 train go-forward in Mozambique in parallel with a 2 train expansion for PNGLNG, with a sanction window in 2019. Credit Suisse will see how quickly both opportunities can be matured and if the market space is there for both.
Exxon’s opportunity pool in LNG deepens – they will market the old fashioned way: With PNG expansion, Mozambique and Golden Pass Exxon is involved in three major LNG development opportunities. Thus far it has been a ‘traditional’ LNG marketer, selling long term and not building portfolio positions, unlike Shell, Total and possibly BP. Credit Suisse understands Exxon has no plans to change its approach to marketing LNG i.e. to seek and secure long term offtake agreements prior to project sanction.
The companies mentioned in this article are subjects of research reports issued recently by investment firms. Their opinions in no way represent those of VoiceObserver.com