Eni Increases Gas Reach With $4.9 Billion Neptune Deal

(Bloomberg) -- Italian energy giant Eni SpA expanded the reach of its natural gas business through the joint acquisition of explorer Neptune Energy Group Ltd. for $4.9 billion.

The deal, done in conjunction with Eni-controlled Norwegian producer Var Energi ASA, adds assets from North Africa to the North Sea and boosts the companies’ production of natural gas at a time when Europe is in desperate need of the fuel. 

“We see the transaction adding around 4 billion cubic meters of gas supply for European consumers,” Eni Chief Executive Officer Claudio Descalzi said in a statement on Friday.

Gas has long been key to Eni’s growth plans, becoming even more important since Russia’s invasion of Ukraine deprived Europe of its biggest supplier. Most of Neptune’s production comes from gas fields in the North Sea, North Africa and Asia — all regions where Eni already operates. The fuel is expected to account for 60% of Eni’s hydrocarbon production by the end of the decade, and more than 90% in 2050.

The transaction’s enterprise value is split into $2.28 billion for Neptune’s Norwegian assets, which go to Var Energi, and $2.6 billion for the rest, according to the statement. The deal will add about 130,000 barrels of oil equivalent a day — most of it natural gas — to the Eni and Var Energi portfolios. Var Energi is about 63% owned by Eni.

Eni has had Neptune on its radar since at least late 2022 in a bid to expand its gas business, and was nearing a deal for the company earlier this week, Bloomberg News reported. Neptune, which is backed by Carlyle Group Inc. and CVC Capital Partners, was formed in 2015 by former Centrica Plc boss Sam Laidlaw.

“This consideration is at the lower end of the range reported in the press,” Ashley Kelty, an analyst at Panmure Gordon & Co., said in a note. “While Neptune management will possibly be disappointed at the price, the PE backers should be pleased as this is a decent return.”

Eni shares slipped 1.1% in Milan. Var Energi rose 2% in Oslo.

Dealmaking in the oil and gas sector is accelerating as governments prioritize security of supply and the biggest players and investors seek to deploy capital. Many of the acquisitions have targeted less environmentally damaging sources of energy, and Eni’s deal represents a rare upstream acquisition by a European major amid the broader industry shift to renewables.

“The rationale for Eni’s $4.9 billion all-cash acquisition of Neptune Energy is compelling, given the portfolio’s 77% gas weighting, proximity to European markets amid operational overlap and synergies.” — Will Hares, Bloomberg Intelligence global energy analyst.

The deal also increases gas in Var’s energy mix, which has hitherto been predominantly oil, and strengthens company position in the Barents Sea. Neptune’s output in Norway is 57% gas or liquefied natural gas, according to Eni’s statement. 

“This is also really bringing a very good commodity mix to Var Energi,” Chief Executive Officer Torger Rod told reporters on Friday. 

(Updates with analyst comment in seventh paragraph.)

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