TOKYO/SINGAPORE (Reuters) - Osaka Gas Co Ltd (9532.T) said it will buy U.S. shale gas developer Sabine Oil & Gas Corp (SABN.PK) for $610 million, as the Japanese company looks to expand its overseas business for future growth.
The deal marks the first acquisition of a U.S. shale gas developer by a Japanese company, Osaka Gas said.
The Japanese firm, which bought an interest in the field in July last year, will become operator of the business, which owns 175,000 net acres in East Texas with about 1,200 wells producing about 1.7 million tonnes of shale gas a year.
“In addition to the increased share, the complete acquisition gives Osaka Gas operatorship, specifically control over capital and drilling decisions,” said Kristy Kramer, research director at consultancy Wood Mackenzie.
“This means Osaka Gas can directly control the volume produced,” Kramer said, adding that Osaka Gas will be the only Asian offtaker of U.S. liquefied natural gas (LNG) with operatorship of a U.S. upstream business.
Osaka Gas decided to buy the whole company after Sabine put itself up or for sale as the wells were producing more volume than expected and generating stable cash flow, a company spokesman said.
The Sabine shale gas project is one of Osaka Gas’s three core U.S. businesses, along with the Freeport LNG liquefaction project and independent power producer projects (IPP).
Under its long-term business strategy, the company aims to boost overseas earnings to a third of total recurring profit by 2031, up from 9% in the year ended March this year.
The Freeport LNG export project in Texas is expected to produce its first commissioning cargo next month, WoodMac’s Kramer said.
“Sabine Oil & Gas’s current production is close to Osaka Gas’s feedgas requirements for its tolling position at Freeport,” she added.
The Sabine deal is subject to approvals by local authorities and is expected to close by the end of this year, the Osaka Gas spokesman said.
Reporting by Yuka Obayashi in TOKYO and Jessica Jaganathan in SINGAPORE, Editing by Shounak Dasgupta and Richard Pullin