![ConocoPhillips Unloads Legacy British North Sea Assets For Over $2 Billion](/sites/default/files/styles/hart_news_article_image_640/public/image/2019/04/conocophillips-unloads-legacy-british-north-sea-assets-over-2-billion.jpg?itok=CjtckJZx)
Pictured are Britannia Satellites operated by ConocoPhillips. The fields produce through subsea manifolds and pipelines linked to the Britannia Platform, which is one of the largest natural gas and condensate fields in the North Sea. (Source: ConocoPhillips Co.)
Private-equity firm Chrysaor Holdings Ltd. agreed to scoop up legacy British North Sea assets from ConocoPhillips Co. in a transaction worth more than $2 billion, the companies said April 18.
The sale is a part of ConocoPhillips’ strategy to focus on low-cost opportunities, said CEO Ryan Lance, which includes growing production from the Houston-based company’s so-called “Big 3” unconventional assets in the Lower 48.
As part of the agreement announced April 18, Chrysaor will buy two ConocoPhillips U.K. subsidiaries for about $2.7 billion, plus interest and customary adjustments. The effective date for the transaction will be Jan. 1, 2018.
Together, the subsidiaries indirectly hold ConocoPhillips’ E&P assets in the U.K., as well as associated decommissioning liabilities. ConocoPhillips has had activities in the U.K. since 1964, when acreage was awarded to the company in the country’s first licensing round, according to the company’s website.
Chrysaor said the transaction will increase its pro forma 2P reserves total to over 600 million barrels of oil equivalent (boe), making it the largest independent U.K. producer while also reinforcing its production plan to sustain outstanding cash generation.
“Acquiring ConocoPhillips U.K. accelerates our strategy and further strengthens our position as one of the leading independent exploration and production companies in Europe,” Phil Kirk, Chrysaor CEO, said in a statement. “These assets complement our existing operations and, with operating costs at less than $15 per barrel across the enlarged group, our portfolio delivers high margins and significant positive cash flow.”
Proved reserves associated with the assets being sold were roughly 99 million boe at year-end 2018. The assets were producing about 72,000 barrels of oil equivalent per day last year, which implies a roughly four-year proved reserve life, according to Bob Brackett, senior research analyst with Bernstein.
“In terms of value, our upgrade note last year carried U.K. at $3.4 billion so running it one more year and then getting $2.675 billion for it [and avoiding asset retirement obligations/hiccups and frankly avoiding a lower Europe gas price environment] should be seen as quite reasonable by investors,” Brackett said in an emailed statement April 18.
ConocoPhillips’ assets include the Britannia and J-Block operated hubs in the U.K. Central North Sea plus East Irish Sea assets and interest in the Clair Field area located in the West of Shetlands region. In addition, Chrysaor will assume responsibility for an ongoing decommissioning program on ConocoPhillips U.K.’s end‐of‐life assets located in the U.K. Southern North Sea.
![ConocoPhillips UK And Norway North Sea Asset Map (Source: ConocoPhillips Co.)](/sites/default/files/inline-images/ConocoPhillips%20UK%20And%20Norway%20North%20Sea%20Asset%20Map%20Source%20ConocoPhillips%20Co.jpg)
(Source: ConocoPhillips Co.)
“We are extremely proud of the legacy we’ve built in the U.K. over the last 50 years and are pleased that Chrysaor recognizes the value of this business,” Ryan Lance, chairman and CEO of ConocoPhillips, said in a statement. “This disposition is part of our ongoing effort to hone our portfolio and focus our investments across future low cost of supply opportunities.”
RELATED: ConocoPhillips Pursues More Growth Opportunities As Production Rises
Chrysaor said it will fund the more than $2 billion acquisition with existing cash resources and an upsized $3 billion reserve based lending debt facility underwritten by Bank of Montreal, BNP Paribas, DNB Bank and ING Bank.
As part of the agreement, ConocoPhillips will retain its London-based commercial trading business and its 40.25% interest in and operatorship of the Teesside oil terminal.
The transaction is subject to regulatory approval and other specific conditions precedent. ConocoPhillips said it expects to close the sale in the second half of 2019.
Chrysaor is backed by Harbour Energy, a permanent capital energy investment company managed by EIG Global Energy Partners. The company’s financial advisers for the transaction are BMO Capital Markets Ltd. and Jefferies International Ltd.
Emily Patsy can be reached at epatsy@hartenergy.com.
Recommended Reading
Enverus: 1Q Upstream Deals Hit $51B, but Consolidation is Slowing
2024-04-23 - Oil and gas dealmaking continued at a high clip in the first quarter, especially in the Permian Basin. But a thinning list of potential takeout targets, and an invigorated Federal Trade Commission, are chilling the red-hot M&A market.
Gulfport Plans Liquids-rich Program After ‘Strong’ Ohio Oil Tests
2024-05-01 - Appalachia gas producer Gulfport Energy continues to report “strong oil production” from a two-well Hendershot pad drilled in eastern Ohio last year. Gulfport plans to develop additional liquids-rich opportunities this year as natural gas prices hover near record lows.
Chesapeake COO: Shale Gas Basins See Exploration, Step-out Activity
2024-06-19 - U.S. gas producers continue to wade through low commodity prices, a situation made even stickier by record Permian gas production, said Chesapeake COO Josh Viets. But with a “constructive” natural gas market on the horizon, producers are consolidating and exploring for drilling runway.
Gas Producers Increasingly Dominating in New Shale Top Operators List
2024-06-26 - As more private oil producers are gobbled up by giant publics, the gas players are moving up the ranks of the top operators, according to a compiled list by Enverus in an exclusive partnership with Oil and Gas Investor.
Enverus: Permian Gains Will Sustain US Oil Production Through 2030
2024-05-09 - Crude output gains from the Permian Basin will keep U.S. oil production relatively flat entering the 2030s, offsetting declines from mature oily basins, according to Enverus Intelligence Research.