US independent sells UK North Sea E&P assets and decommissioning liabilities to private equity-backed player
ConocoPhillips is selling its UK North Sea exploration and production assets to Chrysaor in a deal worth around $2.7 billion.
The deal, announced by both companies on Thursday, brings to an end the recent chase for ConocoPhillips’ UK assets, which has seen chemicals and shale player Ineos show interest before walking away, and Italian major Eni also enter the race.
The $2.675 billion deal sees private equity-backed Chrysaor, led by chief executive Phil Kirk, get its hands on operated hubs in the central North Sea as well as a hold in the Clair field area in the West of Shetland area.
The two central North Sea hubs are Britannia and J-Block, while Chrysaor is also taking on decommissioning liabilities at ConocoPhillips’ ageing assets in the southern North Sea gas basin, where the new owner plans to be materially completed by 2022.
Houston-based ConocoPhillips will, however, retain its London-based commodity trading business and its 40.25% operated stake in the Teesside oil terminal.
The assets being acquired had production of 72,000 barrels of oil equivalent per day for ConocoPhillips last year, immediately increasing Chrysaor’s pro forma output to 177,000 boepd. However, the new owner expects its total pro forma production for this year to hit more than 185,000 boepd by the end of the year.
The traded assets also bring more than 280 million boe of proven and probable oil and gas reserves, nudging Chrysaor’s pro forma proven and probable reserves past 600 million boe.
The effective date of the transaction is 1 January, 2018, with the deal seen closing late this year.
Oil
Kirk said: “These assets complement our existing operations and, with operating costs at less than $15 per barrel across the enlarged group, our portfolio delivers high margins and significant positive cash flow.
“In the central North Sea, we will own a range of operated hub infrastructure providing access points in an area with the largest undeveloped contingent and prospective oil and gas resource base in the UK.
“In the West of Shetlands region, we have secured long life cash flows from two world-class fields operated by BP.
“Chrysaor’s West of Shetlands position also provides exposure to a developing region with significant interest and momentum from major oil companies. We will seek to build on that through the acquisition of additional interests and acreage.”
Ryan Lance, ConocoPhillips’ chief executive, said: “We are extremely proud of the legacy we’ve built in the UK over the last 50 years and are pleased that Chrysaor recognises the value of this business.
Chrysaor ‘eyeing Chevron’s North Sea assets’
“This disposition is part of our ongoing effort to hone our portfolio and focus our investments across future low cost of supply opportunities.”
Chrysaor was reported to be in talks over ConocoPhillips’ UK assets before Ineos showed an interest before dropping it.
Eni was said to have tied up with Norwegian private equity player HitecVision to bid against Chrysaor for the assets.
Chrysaor, backed by private equity firm EIG Global Partners, became one of the largest North Sea producers after acquiring assets from Shell for $3.8 billion in 2017.
UK-based research company Wood Mackenzie said the deal puts Chrysaor on track to be the top producer in the UK this year.
Senior WoodMac North Sea upstream analyst Romana Adamcikova said: “Considering the company was a relatively small producer before it acquired a batch of assets from Shell in 2017, this is a story of incredible growth.
She added: “ConocoPhillips is shifting its focus towards lower cost opportunities elsewhere in the world, particularly in the US. Among such a wider global portfolio, UK fields would have struggled to compete for capital.
“Chrysaor also gains a stronger presence in the West of Shetland with a stake in Clair. It already had an interest in the Schiehallion field.
“There is huge growth potential in the region and it wouldn’t be a surprise to see Chrysaor make further moves in the near future, to bolster its mid- to long- term production outlook.”
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