INVESTORS from the Middle East and Norway are buying a £500 million UK North Sea oil and gas portfolio from Total in a deal that provides a huge vote of confidence in the prospects of the area.
Oman-based conglomerate MB Holding and Norway-based private equity investor HitecVision have clinched a deal to buy stakes in a range of fields off North East Scotland from Total for $635m (£508m).
Read more: Israeli firm hails 'exciting growth opportunities' in North Sea after $2bn deal
The buyers said the deal would bring them a material cash-generative operation and represented the first step in a campaign to build a significant North Sea business. More acquisitions are set to follow in the area.
The investors plan to build a business with operations spanning the spectrum of exploration and production operations in a basin in which they see potential to make lucrative finds.
Describing the North Sea as prospective, MB Holding and HitecVision said: “The current acquisition is the first step in the realization of this strategy and provides a fundament for further expansion through organic and in-organic activities.”
The deal was welcomed by industry body Oil & Gas UK, which said: “This major transaction is another signal of confidence in the industry and neatly illustrates how the hard work to improve the attractiveness of the UK Continental Shelf (UKCS) is enabling a diverse range of investors to play into the basin.”
Read more: Bumper deal creates new North Sea giant
The acquisition continues the shake up in the North Sea which was triggered by the plunge in the crude price from 2014 to 2016.
This prompted a range of majors to sell off North Sea assets in order to focus investment in areas they thought had more potential.
The deal provides further evidence that international private equity investors think the rationalisation process in the North Sea has created opportunities to buy assets with long term potential at attractive prices.
Private equity-backed Chrysaor has bought big North Sea portfolios from Shell and America’s ConocoPhillips in multi-billion deals.
Total said the North Sea remains core to the business. The sale will allow the group to rationalise the enlarged North Sea portfolio it amassed following the £5.8 billion acquisition of Maersk Oil in 2017.
The group wants to focus on North Sea fields with lower operating costs so that it can break even at $30 per barrel oil.
Read more: Total starts production from massive North Sea gas field
The involvement of MB Holding in the Total deal is noteworthy at a time when some oil and gas firms see the Middle East as a more attractive investment proposition than the North Sea.
MB Holding was formed by petroleum engineer Mohammed Al Barwani in 1982 as an oilfield services company and has expanded into areas such as mining and marine engineering
The group moved into the E&P business in Oman in 1999 through its Petrogas subsidiary. It entered the North Sea in 2014 after buying a Dutch operation from Chevron.
Petrogas chief executive Usama Al Barwani said yesterday the North Sea was a heartland for the firm, which had a vision for consolidation and growth in the area.
He said the deal with Total was “a significant step in line with a wider vision, adding material asset base, a diverse portfolio and valuable talent pool”.
Petrogas and HitecVision will acquire interests in 10 fields from Total through their Petrogas NEO venture. The portfolio includes stakes in the Golden Eagle and Dumbarton fields which lie around 70 and 135 miles north east of Aberdeen respectively.
Petrogas NEO said the portfolio would bring an expected 25,000 barrels of oil equivalent per day (boepd), putting the business acquired among the 20 largest producers on the UKCS. It expects to build an energy company with production of more than 100,000 boepd.
Petrogas NEO said no redundancies are expected as a result of the deal. Around 110 people work on the assets that are being acquired.
Read more: $400m deal for Verus shows growing appeal of North Sea
HitecVision has backed North Sea- focused Verus Petroleum on a growth push that has involved acquisitions. The private equity firm has interests in a range of oil services companies.
Ross Cassidy at oil and gas consultancy Wood Mackenzie’s said: “The combination of Petrogas and HitecVision in the UK is a promising sign for investment in the UK upstream sector.”
He noted: “Petrogas specialises in mature, producing assets where it can leverage its subsurface expertise to increase production.”
Brent crude traded up around $2 per barrel, at $66.24/bbl, yesterday afternoon following news that US stocks had fallen sharply last week.
Booming output in US shale fields has kept pressure on prices in recent months.
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