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Total sells pool of North Sea oil assets for $635m


French energy major Total has agreed to sell a pool of North Sea oil assets — acquired as part of its 2017 deal for Maersk Oil — for $635m, the company announced on Wednesday.

The assets in the Eastern North Sea, off the coast of Aberdeen, will be sold to an entity controlled by Petrogas E&P of Oman and NEO E&P, owned by private equity investor Hitecvision.

Among the assets are the Dumbarton, Balloch, Lochranza, Drumtochty fields; majority stakes of more than 60 per cent in Flyndre, Affleck and Cawdor; and smaller shares of three fields operated by China’s Cnooc. These include 32 per cent of Golden Eagle, 5 per cent of Scott and 2 per cent of Telford.

Total production is around 25,000 barrels a day. The deal is expected to close before the end of the year.

“This transaction is consistent with our portfolio management strategy, aiming at lowering our break-even point by optimising capital allocation and divesting high technical costs assets. Our primary objective is to maintain the organic break-even before dividend below $30 per barrel,” said Arnaud Breuillac, in charge of exploration and production at Total.

Total bought AP Moller-Maersk’s oil and gas business in 2017, making it the second largest operator in the North Sea.

Energy majors have sought to sell older fields in the ageing North Sea, where production has been falling, to smaller companies which believe they can squeeze out more value. This has boosted deal activity, despite some producers decommissioning old platforms and pipelines.

John Knight, senior partner at Hitecvision, said it sought to boost the production of Petrogas NEO to 100,000 b/d over the next two to three years. “This is the first step in creating a large new E&P company in the UK,” he said. “We are reinvesting in these assets and stretching life out to the 2040s”.

While Total and its peers are being selective about opportunities in the North Sea, it is committed to the region which is also an effective balance to riskier production from other regions such as Africa or Russia, one person familiar with the transaction said.

UK North Sea oil production peaked in the late 1990s but the industry has seen a revival of late as new projects came online and as companies became more efficient.

In April Chrysaor, the private-equity backed UK oil company, bought the North Sea assets of US energy major ConocoPhillips in a $2.7bn deal.

Others such as RockRose Energy and Serica Energy have done smaller, complex, deals to take assets off the hands of energy majors.

In February, RockRose bought US major Marathon Oil’s two North Sea subsidiaries for $140m, although the subsidiaries came with $350m of cash, meaning Marathon Oil is in effect paying RockRose as it will also take on the decommissioning liabilities for the assets.

Last November, Serica completed a deal involving four complex transactions with BP, Total, BHP Billiton and Marubeni, the Japanese trading and investment conglomerate


Published: 10-07-2019
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