NORTH Sea focused Independent Oil & Gas has agreed a deal to buy three big gas fields at what it called a compelling price amid the upheaval triggered by the crude price plunge.
The London-based company has agreed to acquire the Vulcan fields from Verus Petroleum for up to £5 million in a deal it said would result in the firm acquiring resources at 22 cents per barrel.
Private equity-backed Verus Petroleum said the fields are among the largest resources in the Southern North Sea.
Independent’s chief executive Mark Routh said the company was pleased to have agreed a major transaction in what remains a challenging market.
With buyers in fairly short supply some assets are available at much lower prices than they may have fetched during the boom that ended after the crude price started tumbling in June 2014.
Some firms may want to sell assets because they need to raise money to help service their debts. Others want to offload acreage to focus spending on areas where they expect to be able to generate the best returns.
Verus Petroleum’s chief executive Alan Curran said: “The sale of these discoveries to IOG is consistent with the Verus strategy to focus initially on expanding our portfolio of quality producing assets before investing in development projects.”
Independent put itself in a strong position to pursue deals that month when it secured around £14m loan funding from London Oil & Gas.
While some firms are keen to reduce their exposure to the North Sea, Independent believes its growing scale will help increase the chances of success in the area.
“We remain confident that with the right approach, there is considerable value remaining in the North Sea,” said Mr Routh.
The company noted the Vulcan fields lie close to the Blyth find, which it hopes to bring into production. Independent believes that by developing dormant discoveries through common existing infrastructure it could cut development costs significantly.
The company will have to prepare detailed costings before developing the fields but does not feel further drilling is required to assess the size of the finds.
London Oil & Gas said it was in advanced discussions with Independent regarding the development funding required to unlock the considerable value in the firm’s portfolio.
Independent has agreed to pay an initial £1 million for the fields plus £0.75m nine months after completion. It will pay up to a further £3.25m depending on one of the fields being brought onstream.
The three fields are estimated to contain 320 billion cubic feet gas, 53.45m barrels oil equivalent, in total. The acquisition is expected to generate $25.6 million tax benefits.
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