Elaine Reynolds
15 February 2017

Filicudi discovery - positive start to 2017 Barents exploration

Lundin’s Filicudi discovery is a successful start to exploration drilling in 2017 for the Barents Sea. The prospect holds an estimated 35 - 100mmboe and encountered 63m of oil and 66m of gas in high quality Jurassic and Triassic sandstones. Filicudi is on trend with Johan Castberg around 40km to the north east and the discovery has derisked the adjacent 218mmboe Hurri prospect together with the 285mmboe Hufsa. As a result, both prospects now carry a 25% CoS, and Lundin and licence partners AkerBP and Dea are considering drilling one or both of these later this year.

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Will Forbes
10 February 2017

Tullow dipping a toe back into exploration

It is not surprising to see the markets continue to concentrate on the near-term financial health of the company given the material impacts that the TEN start-up and recent issues with Jubilee will have in 2017. Tullow rightly acknowledge the company’s current financial situation and are focussing on production cashflows to enable the steady de-leveraging of the balance sheet. Exploration and appraisal spend remains at very limited levels vs history.

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6 February 2017

Diversified Gas and Oil - quick thoughts

First few days of dealing

Friday 3rd February was the first day of dealing for Diversified Gas and Oil, a conventional onshore US producer with assets in the Appalachian basin (in Ohio, Pennsylvania and West Virginia). The company raised c. US$50m (c.£40m) pre-expenses through a placing of 61m shares at 65p/share (indicating a market value of £69m or $86m). This blog is a summary of parts of the admission document and our reflections on it based on initial and basic analysis.

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Ian McLelland
1 February 2017 · 3 min read

Shell/Chrysaor deal… raising the private equity stakes

PE continues to build its influence in the UK North Sea

While details on the Chrysaor/Shell deal are pretty thin on the ground, it clearly represents another material transaction for private-equity investors in the North Sea. Previous press reports were that Chrysaor was in competition with Ineos and fellow PE-backed Siccar Point to acquire the portfolio of assets that were put up for sale in late September 2016 as part of Shell’s $30bn divestment programme following the BG acquisition. As recently as October 2016, the for sale package was reported in the press to be valued at around $2.2bn so the $3.0bn that Chrysaor is paying (that could increase to $3.8bn) reflects a bullish view of the sector, albeit the asset package may have changed during negotiations and oil is $7-8bbl than at that time. In terms of materiality, the Chrysaor deal easily trumps Siccar Point’s acquisition of OMV UK announced in November 2016 for up to $1bn, further increasing the exposure of PE to the UK North Sea.

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Will Forbes
27 January 2017

Tullow’s cost of capital: Uganda farm-out implies a return for Total of 19%

Tullow’s recent deal with Total in Uganda indicates it (along with the E&P sector) still faces a difficult funding situation, with the implied cost of capital for Tullow of 19%.

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Sanjeev Bahl
27 January 2017

EnQuest acquisition: Ability to extract net economics (NAV) will be demonstrated over time

EnQuest’s agreement to take over operatorship of Magnus, SVT and associated infrastructure is a material operational undertaking, especially when considered in parallel with commissioning and ramp-up of production at Kraken. The transaction will involve EnQuest taking on several hundred onshore and offshore staff and contractors. With this in mind, EnQuest’s staged approach, which involves taking on just 25% of Magnus and an additional 3% of SVT at the outset, appears to be sensible. The combination of deferred consideration payments, a ‘call’ option on additional equity in the transaction assets and downside protection mechanisms suggest that EnQuest is backing its ability to maximise value from late-life assets without exposing shareholders to potential downsides. EnQuest has until 15 January 2019 to exercise its option over an additional 75% of Magnus and related transaction assets, giving it time to understand the operational complexities as well as study decommissioning options before taking on risk. 

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