OIL and gas entrepreneur Algy Cluff has struck a deal to buy into up to three UK North Sea exploration licences operated by the Parkmead Group run by Tom Cross for £1 amid the crude price plunge.
The Cluff Natural Resources business founded by Mr Cluff has agreed to acquire stakes of up to 25 per cent in two licences from private equity-backed Verus Petroleum with an option to buy into another.
Mr Cluff noted two of the licences contain prospects which are ready to drill.
“We are delighted to have been able to take advantage of the current circumstances in the North Sea which have seen a number of very high quality exploration and appraisal assets become available at low or even no cost,” he said.
If the deal completes it will see two of the oil and gas industry’s best known entrepreneurs join forces to work on the licences.
Mr Cluff founded the firm that discovered the Buchan oil field in the North Sea in 1975 then moved into gold mining in Africa.
Mr Cross grew North Sea-focused Dana Petroleum into a business that was valued at £1.9bn when it was bought by Korea National Oil Corporation in 2010.
The agreement between Cluff Natural Resources and Verus provides further evidence of the blow dealt to North Sea exploration sector by the crude price slump since 2014.
Only 13 wells were drilled on the United Kingdom Continental Shelf last year.
The price fall has made firms increasingly reluctant to drill in an area where experts believe there may not be many big fields left to be discovered.
The chief executive of Verus Petroleum, Alan Curran, said: “We don’t see merit in spending lots of capital in the current environment drilling exploration wells.”
However, he said the company still expects to be able to make money in the North Sea.
Mr Curran said analysis by the Wood Mackenzie consultancy suggested 70 per cent of the North Sea’s oil ands gas fields can make money with Brent crude trading at current levels, around $40.
Backed by Norway’s HitecVision, Verus expects to find opportunities to buy production assets at attractive prices amid the downturn.
Mr Cluff noted the cost of drilling wells has fallen sharply. Services firms have cut prices in the hope of winning business in a shrinking market.
Cluff Natural Resources said it expects wells will be drilled on the Skerryvore and Fynn prospects on the licences within the next 12 to 24 months to take advantage of the lower cost operating environment.
The agreement with Verus could result in a big expansion of Cluff’s North Sea business.
The company has five licences in the Southern North Sea which it said demonstrated significant gas potential.
Mr Cluff shifted the company’s focus on to the North Sea oil and gas business last year after experiencing a setback in his attempt to produce gas by burning coal that lies beneath the Forth.
The company stopped spending on the Kincardine Underground Coal Gasification project after the Scottish Government imposed a moratorium on UCG schemes while it completed a study and public consultation.
Tom Cross was not available to comment yesterday. He has said the downturn in the North Sea has created opportunities to accelerate growth at Parkmead by acquiring quality assets at attractive prices and increasing drilling to capitalise on the drop in costs.
Cluff Natural Resources has agreed terms to acquire five per cent non-operated interests in licences P1944 and P2156 in the Outer Moray Firth, which contain the Fynn and Penny exploration heavy oil prospects.
It will have options to increase its interest in the licences to 25 per cent and to acquire a 25 per cent interest in Licence P2082 east of Aberdeen, which contains the Skerryvore prospect.
The firm said the consideration for the proposed acquisition and for the option agreements shall be £1.
It noted the acquisition remains subject to the parties entering into a binding contract, and to obtaining third party consent and governmental approval.
Verus Petroleum took over the UK portfolio built by Bridge Energy, following a buyout of that business which was backed by HitecVision.
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