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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Electricité de France    EDF   FR0010242511

ELECTRICITÉ DE FRANCE (EDF)
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Exxon beefs up Mozambique LNG project to cut costs ahead of bank talks

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07/12/2018 | 07:20pm CEST
FILE PHOTO: An airplane comes in for a landing above an Exxon sign at a gas station in the Chicago suburb of Norridge

LONDON (Reuters) - Exxon Mobil will expand its Rovuma liquefied natural gas (LNG) project in Mozambique by half to cut production costs as the partners prepare to book the plant's supply and formally tap lenders in September, the company told Reuters.

The U.S. oil giant took charge of the East African LNG project's onshore operations following a $2.8 billion (2.12 billion pounds)deal with Italy's Eni last year, adding to its slate of planned gas projects in Qatar, Papua New Guinea, Russia and the United States.

It now aims to build the world's biggest liquefaction units, or trains, outside Qatar, in Mozambique's remote north, shelving former operator Eni's more modest blueprint in pursuit of cost savings to boost returns on investment.

"The larger train design will lower the unit cost of the Rovuma LNG project and ensure a competitive new supply for the global LNG market," Exxon spokeswoman Julie King said in response to emailed questions.

Under new development plans submitted to the government this week, Exxon's first two liquefaction trains should each produce 7.6 million tonnes per annum (mtpa), with a start date in 2024.

Eni initially planned 5 mtpa trains.

The Italian oil major holds the offshore resource licence to Area 4, which contains some 85 trillion cubic feet of gas in place to be supercooled into a liquid and exported on ships to world markets.

Super-sizing the first two trains means having to renegotiate a resource-sharing deal Eni struck in 2015 with rival LNG project developer Anadarko Petroleum, which owns the neighbouring Area 1 licence, industry sources said.

A geologically porous section of Area 4 covering the Mamba and Prosperidade fields straddles Area 1. This effectively means Exxon-Eni would pump gas away from Anadarko's adjoining reservoir to feed its LNG plant.

"Area 4 and Area 1 stakeholders have agreed on the Unitization and Unit Operating Agreement (UUOA) which has been presented to the Mozambican government for approval," Exxon's King said.

Anadarko spokeswoman Helen Wells said the company was engaging with the government and Area 4 to address any concerns and ensure the UUOA benefits all involved.

COMMERCIAL STRUCTURES

Mozambique's two rival LNG projects are ramping up to take final investment decisions (FID) in 2019 and both are teeing up buyers and loans to underpin hefty construction costs.

But there the similarities end.

Anadarko Petroleum's approach involves raising a record $14-$15 billion from banks and export credit agencies (ECAs) to fund the build. At the same time, it is lining up long-term LNG sales deals with external companies in China, Asia and Europe to guarantee the loans.

Exxon in contrast will finance a larger share of costs from its own pockets as well as drawing on project partners, including Eni, Korea Gas Corp and China National Petroleum Corporation [CNPET.UL], bank and industry sources say.

Exxon said it expects Rovuma LNG financing to originate from a mix of "external lenders and joint-venture party funding."

"We have begun initial engagement with lenders and are planning a formal kick-off event in September 2018," King said.

Exxon already approached those ECAs that backed Eni's Coral South Floating LNG project in Area 4 last year, sources said.

For its part, Anadarko engaged commercial banks on May 21 after having first secured interest for about $12 billion from ECAs.

Production from Rovuma LNG will also be treated differently.

While Anadarko sought out buyers from France's EDF to Britain's Centrica and Japan's Tokyo Gas, Exxon is holding talks for binding sales and purchase agreements for Rovuma output with subsidiaries of its Area 4 project partners.

"We expect sufficient interest from the affiliate buyers to launch the project and support the financing," King said.

(Reporting by Oleg Vukmanovic, editing by David Evans and Alexandra Hudson)

By Oleg Vukmanovic

Stocks mentioned in the article
ChangeLast1st jan.
ANADARKO PETROLEUM 1.23% 66.82 Delayed Quote.24.57%
CENTRICA -0.31% 146.8 Delayed Quote.7.32%
ELECTRICITÉ DE FRANCE -1.15% 15.42 Real-time Quote.49.66%
ENI 2.43% 16.548 End-of-day quote.19.91%
EXXON MOBIL CORPORATION -0.12% 86.5 Delayed Quote.3.42%
KOREA GAS CORP --End-of-day quote.
TOKYO GAS CO LTD 1.03% 2786 End-of-day quote.6.62%
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Financials (€)
Sales 2018 69 685 M
EBIT 2018 6 179 M
Net income 2018 2 256 M
Debt 2018 38 800 M
Yield 2018 2,03%
P/E ratio 2018 18,87
P/E ratio 2019 16,63
EV / Sales 2018 1,23x
EV / Sales 2019 1,22x
Capitalization 46 945 M
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Mean consensus HOLD
Number of Analysts 19
Average target price 13,3 €
Spread / Average Target -15%
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Managers
NameTitle
Jean-Bernard Lévy Chairman & Chief Executive Officer
Xavier Girre Senior Executive Vice President-Group Finance
Christophe Salomon Head-Information Systems
Bruno Lafont Director
Jacky Chorin Director
Sector and Competitors
1st jan.Capitalization (M$)
ELECTRICITÉ DE FRANCE49.66%55 216
ENGIE-14.54%35 633
NATIONAL GRID PLC-12.62%34 534
SEMPRA ENERGY7.75%31 059
ORSTED23.77%27 742
E.ON-1.48%23 074