Wednesday, 16 April, 2025 / Edition 54

What an exciting finish at the Masters on Sunday! My family members have been Rory McIlroy fans for years. It brought us tears to see him overcome all the external and internal challenges to complete his career grand slam. It was so fun to hear him say “I’ve gotta go get a green jacket!” Did anyone else watch?

Now, let’s see what happened in the world of energy last week. 

P.S. Please do take a peek at the upcoming webinar featured in this edition, hosted by AAPG Academy. Principal Consultant at DKC Strategies David Curtiss and I will be discussing current industry trends and their effects on the oil and gas workforce. We hope to see you there!

Shangyou Nie

Editor, Well Read

NextDecade Closes Two LNG Deals with Aramco and TotalEnergies

Edgar Lee Espe/Shutterstock.com

LNG producer NextDecade Corp. signed two long-term gas Sales and Purchase Agreements (SPAs) in one week: One with Saudi giant Aramco and one with French major TotalEnergies.

The transactions are further examples of the acceleration in deal making for U.S. LNG since President Trump returned to office.

Deal #1 details:

• TotalEnergies will purchase 1.5 million tonnes per annum from NextDecade Rio Grande LNG, Train 4 for 20 years.

• The SPA is on a free-onboard basis with gas price indexed to Henry Hub, subject to NextDecade taking Final Investment Decision on Train 4.

Deal #2 details:

• Aramco will purchase 1.2 million tonnes per annum from NextDecade Rio Grande LNG, Train 4 for 20 years.

• The SPA is on a free-on-board basis with gas price indexed to Henry Hub, subject to NextDecade taking FID on Train 4.

About NextDecade:

• NextDecade is traded on the NASDAQ and has a market cap $1.9 billion.

• Its share price rose 13.5 percent after the deal with Aramco was announced. It increased another 9.2 percent on Monday upon the news of the deal with TotalEnergies.

About Rio Grande LNG:

• Rio Grande LNG is located in Brownsville, Texas. NextDecade took FID for Phase 1 Rio Grande LNG in July 2023.

• NextDecade’s (20.8 percent) equity partners for Phase 1 include TotalEnergies (16.7 percent), Global Infrastructure Partners, Singapore-based GIC, and Mubadala Investment Co., an ADNOC subsidiary. The last three have a combined economic interest of 62.5 percent.

• Phase 1 is under construction and has three LNG trains totaling 17.6 million tonnes per annum. First LNG is expected in 2027 for Train 1, 2028 for Train 2, and 2029 for Train 3.

• NextDecade says that its Phase 2 will consist of Trains 4 and 5 with 12 million tonnes per annum of capacity. Total capacity will reach 48 million tonnes per annum across eight trains at Rio Grande LNG.

• According to NextDecade, the site has the capacity to construct up to 10 LNG trains, taking full advantage of its proximity to the Permian and Eagle Ford basins.

• A CCS project associated with Rio Grande LNG is being developed to reduce the CO2 footprint of the projects.

What to watch:

• Who might sign the next LNG SPA with NextDecade?

• With the ongoing tariff war between the United States and China, the world’s largest LNG importer, will any Chinese LNG buyers also sign long-term SPAs with U.S. LNG producers?

A message from AAPG Academy and The University of Oklahoma

Join AAPG Academy and experts David Curtiss and Shangyou Nie for a free webinar on 24 April that will explore the current state of the upstream energy market, including recent trends and their effects on the workforce. 

Nie will analyze the following five trends, then Curtiss will provide his perspective on the impacts each trend could have on the oil and gas workforce:

1. A global refocus on the core businesses of oil and gas
2. The growing importance of gas for future energy and LNG opportunities domestically and internationally
3. A resurgence of exploration, powered by AI
4. Increased attention on geothermal
5. The resurgence of the Middle East in the near and mid-term

The presentation will close with an extended Q&A, offering a chance for personalized advice and insights from Curtiss and Nie.

Tax Savings Drive Deal Making Trend in the North Sea

Eddytb Foto/Shutterstock.com

The Financial Times published an article last week highlighting a trend in deal making in the United Kingdom’s North Sea: companies merge to take advantage of different tax positions.

Driving the trend: The United Kingdom’s government introduced the Energy Profits Levy in May 2022 when companies in the North Sea were reporting record profits as energy prices rose.

• The Energy Profits Levy was introduced as a windfall tax after Russian invasion of Ukraine and energy prices skyrocketed.

• According to the Financial Times, companies in the North Sea now have a 78-percent tax rate on profits, including corporation tax, supplementary tax, and the Energy Profits Levy.

How the mergers work:

• According to the Financial Times, if one company has tax losses but not enough revenue to use the tax credit offered to North Sea operators, it can combine with another company if the second company has a higher production and revenue base.

• Once the two companies combine, the first company’s tax losses can be offset against the second company’s profits—allowing the new combined company to take advantage of the tax advantages offered.

• There are often additional reasons for the mergers, including shared infrastructure, other synergy building, and cost reduction.

Examples from the past six months:

• In late March, NEO Energy announced plans to merge with Repsol UK to form a new independent producer, NEO NEXT Energy.

  • The new company will be 55:45 owned by NEO Energy and Repsol, respectively.

  • The deal is scheduled to close in Q3 2025.

  • NEO had a tax loss position of $3.7 billion.

• In December, Equinor and Shell combined their U.K. units to form a 50:50 joint company.

  • Equinor carried a $7.6-billion tax loss position in the North Sea.

• In October, Ithaca completed a merger with ENI’s U.K. business.

  • Ithaca had $4.5 billion in tax losses at end of 2023.

What to watch:

• As the region enters middle-to late-life stages, this type of deal might become more common.

• “I think it’s probably more likely than not that we will see more deals before the year is out,” said Gail Anderson, Research Director for North Sea Upstream at Wood Mackenzie.

• What might the United Kingdom government do to stop or discourage this type of dealmaking?

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