THE Parkmead Group led by Tom Cross has increased its share in a big North Sea field in a deal that one analyst said looked like a case of a strong firm exploiting weakness in another.
Aberdeen-based Parkmead acquired an additional interest in the Perth field in the Moray Firth from Atlantic Petroleum, which is selling off its UK North Sea assets after incurring hefty losses amid the crude price slump.
Underlining its appetite for more North Sea acquisitions, Parkmead said the Perth deal will allow the firm to increase its reserves by 19 per cent, around 4 million barrels.
It did not disclose a price.
However Colin Smith, oil and gas analyst at Panmure Gordon brokerage, told clients: “We anticipate that it would have been negligible given Atlantic Petroleum’s change in focus.”
Analysts at the WH Ireland brokerage wrote: “It was widely known that Atlantic Petroleum was in financial distress so the development is very much a case of the strong exploiting weakness.”
The deal is the second that Parkmead has concluded with Atlantic in quick succession. In August the company acquired stakes in two big North Sea finds close to the Perth discovery from Atlantic.
The transactions provide further evidence of the shake up in the North Sea which has been triggered by the sharp fall in oil prices since 2014.
This has resulted in many firms putting assets on the market, to raise money if they can and to reduce their work commitments.
In March Atlantic Petroleum told investors it faced a serious funding situation following an extremely difficult year for the industry.
The company said: “For many small cap companies it has been a case of adopting measures to survive. Atlantic Petroleum is one of those companies.”
Mr Cross has made clear he thinks the downturn has created opportunities to use acquisitions to help build a North Sea business to match the success of the Dana Petroleum firm he developed.
The entrepreneur joined Parkmead in 2011 a year after the £1.9bn sale of North Sea-focused Dana to a Korean firm.
Yesterday, he said the fact Parkmead has cash in the bank and no debt leaves it in a strong position to negotiate deals and to move quickly.
Aim-listed Parkmead is working on ten other potential acquisitions in its core areas of the UK and Netherlands and expects to conclude some this year.
Mr Cross said some of the acquisitions would results in Parkmead increasing its exposure to assets it knows well, as was the case with the Atlantic deals.
Some involve distress situations. The third category concerns assets that majors want to offload to cut their exposure to the North Sea.
Asked if Parkmead would be interested in acquiring Xcite Energy, which is in talks about a debt for equity swap, Mr Cross noted the firm had made some technical progress with plans to develop a heavy oil field off Shetland.
He added: “The focus for us is very much on light oil.”
Mr Cross believes oil prices will increase in future as older fields run dry and demand increases.
He reckons Brent crude will rise above $60 per barrel next year. It traded at around $46.50/bbl yesterday, compared with $115/bbl in June 2014.
Scottish Government figures released yesterday showed the total value of North Sea oil and gas produced last year fell by almost a quarter to £13.4bn, the lowest total recorded since 1999. Production increased to 70 million tonnes of oil equivalent (mtoe), up from 57.7 mtoe in 2014-15.
Mr Cross said the latest deal with Atlantic strengthens Parkmead’s position in one of the largest undeveloped oil projects in the North Sea.
Parkmead increased its interests in the Perth and Dolphin fields from 52 per cent to 60 per cent.
The acquisition increased the group's total proved and probable reserves to 23.5 to 27.9 million barrels oil equivalent.
Parkmead hopes to bring the fields onstream in a combined development with the Lowlander find which it controls. The company reckons it could recover more than 80 million barrels oil from a combined development.
Announcing a 834m (£80m) Danish Crown annual loss in March Atlantic Petroleum said an equity injection or creditor solution would be required to keep the group solvent.
In May the company secured an £8m loan facility from London Oil & Gas which it said provided additional working capital and funding for future acquisitions primarily targeted in Eastern Europe and the Eurasia region.
Atlantic Petroleum had 13.35 per cent of the blocks containing Perth. It is thought the remaining 5 per cent interest in the blocks was transferred to Faroe Petroleum, leaving the Aberdeen-based firm with a 38 per cent holding in the acreage.
Shares in Parkmead Group closed up 11 per cent, 5.38p, at 54.62p.
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