THE chief executive of the minnow that is buying a giant North portfolio from Royal Dutch Shell for up to $3.8 billion (£3bn) has said the company plans to make further material acquisitions in the area where it sees huge growth potential.
Phil Kirk said Chrysaor has already lined up backing for more deals from investors and signalled the company has identified possible targets.
“We will be looking to make further material acquisitions and my backers have the appetite and the firepower to do more,” said Mr Kirk, Chrysaor raised $1bn from US financiers to support the Shell deal announced yesterday.
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This will transform the firm, which has exploration interests off Shetland, into the biggest independent operating in the North Sea in one fell swoop.
Chrysaor will acquire more than 100,000 barrels oil equivalent daily production through the deal and increase its staff numbers from 20 to more than 400. The London-based firm has an office in Banchory.
Noting Chrysaor has ideas about what it would like to acquire next, Mr Kirk said directors aim to build a national champion that will compare against any locally-focused firm around the world.
He added: “This is about growth, about investment, it’s good for Scotland. People are really important, we’re not looking to lay anybody off. Nobody’s terms and conditions are changing, we’ll stay in Aberdeen.”
While Shell wants to reduce its exposure to the North Sea, the Chrysaor team believe it is a great time to invest in the area.
Mr Kirk highlighted the fall in operating costs achieved amid the downturn triggered by the crude price plunge, which has involved huge job losses.
“What I am optimistic about is I think there’s a lot more yet to find,” he added. Technological advances could boost the discovery rate.
Chrsyaor is eyeing the ‘vast hopper’ of undeveloped discoveries in the North Sea with a view to bringing them onstream with partners.
It expects to drill eight wells on the Shell assets within months of completing the deal, generating work for the supply chain.
Mr Kirk said its backers are prepared to stay invested over the long term. The investors, including America’s EIG Global Energy Partners, have shown huge faith in the potential of the North Sea.
Mr Kirk was very pleased with the terms of the deal. The company is acquiring around 350 million barrels reserves held in 10 assets at the equivalent of around $8.50 per barrel. Operating costs on the assets, including a stake in the huge Buzzard field, average $15 per barrel. Brent crude fetched around $56/bbl yesterday.
Chrysaor spent months negotiating with Shell, which wants to raise $30 billion to cut debt and maintain payouts to investors.
The giant said it will book a profit on the sale, without giving details. It remains committed to the North Sea. The company’s remaining North Sea assets produced around 100,000 boed last year. Shell is working with BP on giant field developments off Shetland.
The company has cut around 1,000 North Sea jobs since 2014. It plans to close its accounts centre in Glasgow, putting nearly 400 posts at risk.Shell will have around 1350 staff in its UK exploration and production following the Chrysaor deal.
Asked if Chrysaor could handle the Shell portfolio Mr Kirk noted its executives had hundreds of years of relevant experience in total.
A chartered accountant from Derbyshire, Mr Kerr held senior roles at Hess before helping develop the CH4 gas business which was bought by the former Venture Production for £153 million in 2006.
Linda Cook, a former member of Shell’s board has been appointed chairman of Chrysaor.
She said: “The North Sea has undergone a revolution in recent times with operating costs falling to competitive economic levels, and we believe this signals a moment for a generational change in the basin.”
Subject to regulatory and partner consents, the deal should complete in the second half .
Simon Henry, Shell’s chief financial officer, said the deal showed its $30bn divestment programme is gaining momentum. Some of the assets were acquired recently through the £37bn takeover of BG.