PE-backed Neptune Energy sold to Italy’s Eni for $4.9bn

September 2023 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

September 2023 Issue

Neptune Energy is to be sold to Italian energy firm Eni in a deal worth $4.9bn, the largest cash deal in the European oil & gas sector in several years.

Under the terms of the agreement, Vår Energi – 63 percent held by Eni – will buy Neptune’s Norwegian business, which has an enterprise value of around $2.3bn, while the Neptune Global Business will go to Eni for an enterprise value of around $2.6bn.

According to a statement announcing the deals, Neptune Energy’s business in Germany is not part of the transactions and will continue to be owned and operated by the existing Neptune shareholders as a standalone group. Neptune operates oil & gas fields across the UK, Norway, Germany, Algeria, the Netherlands and Indonesia.

Completion of the deal is conditional upon receipt of necessary regulatory and governmental clearances, among other things. The deal is expected to close by the end of the first quarter of 2024.

“Since Neptune’s formation in 2018, we have invested in the business and transformed the organisation, resulting in material improvements in safety, operational performance and cost efficiency,” said Sam Laidlaw, executive chairman of Neptune Energy. “This transaction offers a new and exciting phase for Neptune, with significant growth opportunities supporting energy security and the energy transition, which will benefit from Eni’s and Vår Energi’s larger scale and available resources.”

“This transaction delivers to Eni a high-quality and low carbon intensity portfolio with exceptional strategic and operational complementarity,” said Claudio Descalzi, chief executive of Eni. “Neptune will contribute predominantly gas resources to Eni’s portfolio. Moreover, the geographic and operational overlap is striking, adding scale to Eni’s majority-owned Vår Energi; bringing more gas production and CCUS opportunities to the remaining North Sea footprint; building on Eni’s leading position in Algeria – a key supplier to European gas markets; and deepening Eni’s presence in offshore Indonesia, supplying the Bontang LNG plant and domestic markets.”

Mr Descalzi also expects the added supply to provide further optimisation opportunities for Eni’s global gas and LNG portfolio operations. The transaction could add around 4 billion cubic metres of gas supply for European consumers. A critical element of the transaction is also the low-cost supply and accretive cashflow it provides to Eni. According to Mr Descalzi, the deal therefore supports Eni’s commitment to an attractive and resilient dividend and adds to the potential for share buybacks that make up the balance of the 25-30 percent of cash flow from operating activities the company has committed to distribute.

“The nature and challenges of the energy transition require a focused response and in particular this transaction highlights two important aspects of Eni’s financial strategy – the flexibility and optionality that our strong liquidity and low balance sheet leverage offer; and our innovative satellite model which helps to align and access dedicated capital,” added Mr Descalzi.

Eni is expected to benefit from Neptune’s strong gas reserves as it works toward increasing its share of gas production to 60 percent of its portfolio as part of its plans to achieve net zero by 2030. Neptune produces the equivalent of about 135,000 barrels of oil a day, roughly three-quarters of which is gas.

State-owned China Investment Corporation owns 49 percent of Neptune, with private equity groups Carlyle and CVC Partners owning 30.6 percent and 20.4 percent respectively. The decision to sell the business came after Neptune’s owners abandoned plans to launch an initial public offering (IPO) for the company in 2022. There was insufficient interest from public markets, which are increasingly reluctant to invest in oil & gas producers.

Richard Summerfield