New joint venture will be largest privately-owned integrated energy company operating in Argentina
BP today announced that it has agreed with Bridas Corporation (Bridas) to form a new integrated energy company by combining their interests in the oil and gas producer Pan American Energy (PAE) and the refiner and marketer Axion Energy (Axion) in a cash-free transaction. The new company, Pan American Energy Group (PAEG), will be the largest privately-owned integrated energy company operating in Argentina.
PAEG will be owned equally by BP and Bridas Corporation, itself a 50:50 joint venture of Bridas Energy Holdings of Argentina and CNOOC Limited of China. PAE is currently owned 60% by BP and 40% by Bridas, while Axion is wholly-owned by Bridas. There will be no payments for the equity exchange.
The combination of PAE and Axion under unified ownership will align the PAEG shareholders’ interests across the upstream and downstream value chains in Argentina, Uruguay and Paraguay. PAEG is expected to benefit from BP’s global upstream technical and downstream marketing experience as well as Bridas’ deep operating knowledge. The combination may also offer further integration synergies; the Axion refinery is already the primary customer for PAE’s Argentine crude oil production.
“Supported by the combined skills and expertise of BP and Bridas, this new integrated business will be able to pursue growth and development opportunities in Argentina, Uruguay, Paraguay and Mexico,” said Bob Dudley, BP Group Chief Executive.
“We see value-enhancing opportunities throughout PAEG’s businesses; from extending the life of mature production and developing new unconventional resources including Vaca Muerta, to growth in retail fuels and lubricants marketing. These fit well with BP’s strategy and will allow us to strengthen and deepen our long-term relationship with Bridas.”
“For the past 58 years, we have been investing in the energy sector in Argentina and the region. Efficient investment has been the main factor behind our growth as an oil and gas company. By signing this agreement, a new phase begins for our company, as we integrate our operations with those of our partners,” remarked Alejandro Bulgheroni, Chairman and President of Bridas Corporation.
“This integration agreement ratifies our commitment to investment, employment and the efficient development of resources our region needs,” stated Marcos Bulgheroni, Executive Director at Pan American Energy.
PAE is Argentina’s second largest producer of oil and gas. It had daily production in 2016 of around 262,000 barrels of oil equivalent (boe), equivalent to approximately 18% of Argentina’s total oil and gas production. It has interests in Argentina’s four main hydrocarbon basins, including operating Cerro Dragon, Argentina’s largest oil field, and interests in the prospective Vaca Muerta shale. PAE also operates the Hokchi block in the shallow water Mexican Gulf of Mexico.
Axion Energy owns and operates the 90,000 barrels of oil a day (b/d) refining capacity Campana refinery north of Buenos Aires, has over 750 retail sites in Argentina, Uruguay and Paraguay, and also has material lubricant and aviation fuels businesses.
PAEG’s board of eight will comprise four directors from each shareholder and the shareholders will share nomination rights for key senior executives for the company. PAEG will be self-funded.
The transaction is subject to regulatory filing or approval in several jurisdictions. Completion of the agreement is anticipated in early 2018.