Buy the dip
Mergers and acquisitions have always been part and parcel of the oil and gas industry. Sometimes, it is more efficient to acquire reserves with the cheque book rather than the drill bit.
Assets changing hands can present challenges for data management – whether that be sorting through dusty seismic logs or importing terabytes of unstructured well data. The new owners of those wells often have entirely different preferences for how information is organised, displayed, and eventually analysed.
Back in 2008, Maersk Oil discovered the Culzean gas field. They operated it until 2017, when the company was acquired by TOTAL. Culzean is a HP/HT development and will account for 5% of UK gas when it achieves full production.
Franz Ferdinand, Rockerfella and Deals
The company has a complicated history spanning a century from formation out of the ashes of allied victory in WW1 to now a global super-major ranked 8th in the world.
Unpicking all the various acronyms and subsidiaries would take an age, but essentially the company we know was formed by the eventual merger of PetroFina, Elf and CFP (Compagnie francaise des petroles or The French Oil Company.
The story begins in 1917 when – during crisis – the French made a firm decision to end reliance on imported oil. At the time American firms principally John D Rockefeller’s Standard Oil Co controlled- 70% of the world’s oil output. Chastened by their experience during the war the president Poincare rejected a partnership with Shell and instead set the foundations for an entirely French oil company.
In the post-war period large swathes of the yet unproven Middle Eastern reserves were carved up in the San Remo treaty. This created the Turkish Petroleum Company which was split four ways- 25% to Shell, 50% Anglo-American, and CFP (which would later become TOTAL) secured 20% from Deutsche Bank. The remaining share went to the original Mr 5%- Carlouste Gulbenkian.
In the early ’20s the company focused exploration in Iraq (then part of Persia) with major discoveries at Kirkuk. Refining in Europe (the process of deriving usable products from crude) was gathering pace with PetroFina using oil found in large Romanian reserves to fuel French powerplants back home.
Night and Fog
After a period of growth WW2 began– there was mass bombing of refineries, and tankers with many assets destroyed. During the fallout CFP had its Iraqi fields requisitioned by the British. These globally tumultuous years only strengthened the company’s resolve to no longer be dependent on imported oil and gas.
The mid-part of the century was a time of prodigious expansion for the group. With Charles De Gaulle in power the company ventured into the Sahara where major successes would kickstart the Algerian industry. In later years, giant fields like Hassi Messoud were proved up and still produce 350,000 bbls/day.
Risk and Reward
This era saw exponential growth in demand for refined products including plastics. To meet this demand CFP collaborated with the British to build a refinery in Antwerp, Belgium. In 1949, while exploring the land around Pau, France, drillers hit heavy oil around 700m deep. Continuing down beneath the Cretaceous layer, they soon had an uncontrollable blowout on their hands, and were advised to abandon the project.
A need to exploit local reserves proved too compelling and the Lacq field was developed with estimated reserves of 8.8 TCF. France had taken a major step to the energy independence it desired.
By this point, the company was expanding its downstream business and many new forecourts were built across Europe. The early logos drew inspiration from the French tricolour. Rumour has it that that group was called TOTAL because it was pronounceable in all languages. With the revenue generated, the company set up operations in sub-Saharan Africa, developing onshore and later offshore fields in Gabon. Around this time there was an interesting reversal of fortunes – an LNG plant was built at Marseille and became a supplier to British Gas.
The 70’s started with a major oil shock- the ’73 Yom KIppur war meant oil prices climbed deeply, transforming consumption patterns. During this period, the French invested heavily in the nuclear industry.-TOTAL saw its refining capacity decline and decided to refocus on exploration. It was back to the Middle East and Abu Dhabi, where they partnered with ADNOC.
TOTAL, ELP and PetroFina all wanted to join the scramble for North Sea oil, which was still in its infancy. They realised that to compete with the likes of Phillips Petroleum – who had discovered the giant Ekofisk field-they had to collaborate. TOTAL developed Alwyn, which produced both oil and gas, justifying its high development costs. Meanwhile, PetroFina took a stake in Ekofisk while Elf began production from Frigg.
After the oil shock of the mid ’80s, where the price crashed, for the first time in its history the company decided to downsize its E+P department.
Amid surge of M+A activity – which would form the other majors (ExxonMobil, BP-Amoco) – ELF was viewed as having assets beyond their book value. Principally, Deepwater Angolan discoveries (Girranol) made them an attractive takeover target.
Fast forward to 2015 and – amid another downturn – the company shrewdly acquired Maersk Oils assets for $8 Bn.
This year they repeated the feat of buying beaten down reserves from Tullow’s lake Albert project in Uganda for just $2/bbl.
Looking ahead, the company is well-positioned to emerge from the crisis. It has reduced its exposure to US onshore markets and has the biggest African acreage of the majors, where it is focused on developing deepwater fields. These projects have much longer lead times than onshore, so they should be somewhat insulated from the recent precipitous fall in oil prices.
It’s no Game of Thrones…
Might be a bit whitewashed but still worth a watch…
Audiobook was great! Even the PussyRiot interlude!
Groundbreakers: The story of oilfield technology and the people who made it happen
Spent 50 bucks on this during a hypo-manic spell. Oops.