The North Sea minnow that won backing from US billionaire Warren Buffet has said it is on the hunt for acquisitions in the area despite the dramatic slump in the oil price.
Independent Oil & Gas (IOG) said it is assessing the potential for the acquisition of a number of assets as it eyes growth in the area.
The company underlined its continued confidence in the potential of the North Sea after posting results for what chief executive Andrew Hockey described as a successful year.
Independent turned heads in July when it revealed a business owned by Mr Buffett’s Berkshire Hathaway had bought into its plan to bring a group of undeveloped gas finds into production.
CalEnergy Resources paid £40 million for a 50 per cent stake in the project and agreed to cover up to £125m of IOG’s costs.
However, there has been a dramatic deterioration in market conditions since Independent and CalEnergy approved plans for a £700m development in October.
The Brent crude price fell to a 17-year low of less than $25 per barrel last week amid the economic fallout from the Covid-19 coronavirus and the start of a price war between Saudi Arabia and Russia.
Brent crude fetched $26.32/bbl yesterday afternoon, down $1.07/bbl on the day.
Gas prices had fallen sharply amid strong growth in supplies even before the coronavirus started to impact seriously on UK economic activity.
But Mr Hockey said: “Whilst this unprecedented scenario presents severe challenges across the energy industry, IOG remains in a relatively robust position.”
He noted the company has funding in place for a project that it expects will allow it to generate attractive returns on its investment over the cycle.
The company’s statement of faith in the North Sea will be welcomed by other industry players as they prepare themselves for what may be another long downturn.
The area was hit hard by the fallout from the sharp fall in the oil price between 2014 and 2016.
Firms that provide support services may lower charges as they look to retain business as companies that operate fields cut spending in response to the latest downturn.
Independent has overcome big challenges in recent years, besides those associated with commodity prices.
The company faced an uncertain future before cutting the deal with CalEnergy. The firm that had been its main funder got caught in the fallout from the collapse of the London Capital & Finance (LCF) investment business.
LCF had funded the London Oil & Gas business, which provided debt Independent relied on while working up its plans.
Following LCF’s collapse RockRose Energy made a £27m takeover approach for Independent that the firm’s directors said undervalued it.
A disagreement between Russia and Saudi Arabia about how to respond to the impact of the coronavirus brought an end to a system of production curbs launched late in 2016 to support the market.
IOG made £15m profit in 2019, after gaining £24m on the CalEnergy deal.
Shares in the company closed up 1.12p at 12.12p.
Source: The Herald
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