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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Elaine Reynolds
18 January 2017

Norway awards 56 new licences

Norway has awarded 56 new production licences under the 2016 Norwegian APA (Awards in Pre-defined Areas) Licence Round, which covered the more explored areas of the Norwegian Continental Shelf . Interest was strongest in the North Sea area with 36 awards, while 17 were awarded in the Norwegian Sea. Only three awards went in the Barents Sea, reflecting the frontier nature of the basin. Link to awards maps

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Elaine Reynolds
17 January 2017

2017 Senegal appraisal to kick off in January

Cairn Energy confirmed today that it will return to drilling offshore Senegal by the end of January this year, with two firm wells designed to further evaluate its 473mmbbl SNE discovery. The Stena DrillMax is contracted for these two appraisal wells together with multiple follow on options yet to be confirmed but which could include exploration wells in addition to further appraisal.

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Elaine Reynolds
30 November 2016 · 2 min read

Decommissioning - changing the mindset

£1.1 billion was spent on decommissioning in the UK in 2015, accounting for 5% of total UKCS expenditure that is expected to increase to 12% in 2017. Oil & Gas UK has estimated that decommissioning on the UKCS up to 2025 represents a £17.6 billion opportunity.

With the UKCS accounting for 50% of the global decommissioning spend over the next 5 years, the North Sea is at the forefront of developing the techniques to optimise the process and could position itself as a major player in the global decommissioning industry. At a recent conference on the subject hosted by Edison, together with Addleshaw Goddard, the key themes of cost uncertainty and industry collaboration emerged.

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