Proactive investor9 Jun 2019 12:42
This month, the UK Oil & Gas Authority handed out 37 new licence areas to a total of 30 operators.
It was evidence of that the UK offshore “continues to be revitalised”, according to Dr Nick Richardson, who heads the OGA’s exploration and new ventures unit.
He was especially encouraged by new prospects and play concepts in areas which have never before been licensed.
There’s no shortage deals either as ‘big oil’ sells out - typically to private equity and mid-tier independents.
Deals, deals, deals
Ithaca Energy’s recent US$2bn deal with Chevron, to acquire stakes in ten producing fields, was the latest transaction to put the spotlight on the North Sea.
In April, Chrysaor struck a deal to buy ConocoPhillips out of its North Sea business for US$2.68bn.
EnQuest Plc (LON:ENQ), meanwhile, has been building its business with new field start-ups and via the negotiating table – most recently consolidating its ownership of the Magnus field through a deal with BP.
New North Sea?
Stepping back, Ithaca, which was bought by Israeli group in 2017 for US$1.24bn is instructive of the how these ‘new’ North Sea businesses are being put together.
For a small cap firm the blueprint is grab a discovery, build a field for production (ideally with 15,000 to 20,000 bopd or more) and then get taken out for a premium price.
Larger independent E&Ps, meanwhile, pick up assets from both newly established small caps and large scale later life operations from major oil firms.
Mature basin
The basin is ‘mature’ and the big fields of the past are being managed towards end-of-life and in due course decommissioning.
Significantly, this comes against a backdrop of a broader trend of asset divestment among the so-called ‘supermajors’.
For the mid-tier acquirers it is also seen as a good outcome, especially for those carrying forward tax losses from their expensive field development projects.
It is the icing on the cake for them as these accrued benefits effectively enhance the economics of acquired aging assets.
Faroe Petroleum is geared more to Norwegian waters, but like Ithaca was acquired after it turned a promising asset base into a producing, cash generating business.
Diminishing stock market supply
One reason for the deal uptick is that there is diminishing supply.
Extraordinary assets will always find capital in almost all market conditions.
But, such opportunities are now the exception not the rule in the North Sea - the ‘best’ new oil ventures are now more likely seen further afield, in offshore frontiers in Africa and South America.
Who’s left
There are now fewer North Sea firms on the stock exchange than in the past and project that remain involve development and production scenarios, rather than big bang exploration.
i3 Energy Plc (LON:i3E) is typical. It is working to bring its Liberator oil
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