A PRIVATE equity firm which backed Hurricane Energy’s pioneering West of Shetland oil exploration drive has crystallised a multi-million gain on its investment in the company after helping stoke hopes of a boom in the area.
Kerogen Capital has netted
£51 million after selling around one-quarter of its shares in Hurricane, a former minnow which has shot to prominence on the back of its success off Shetland.
The sale comes weeks after Hurricane started production from the giant Lancaster oil field development off Shetland that is reckoned to contain more than 500 million barrels oil.
Read more: Shetland oil pioneer shrugs off 'Monty Python slap in the face with wet fish'
Kerogen has been rewarded for making the decision to back Hurricane’s work on Lancaster at a time when many firms were slashing investment in the North Sea.
Surrey-based Hurricane won backing from Kerogen for its exploration work on Lancaster in 2016 as the industry was battered by the fallout from the crude
price plunge.
Kerogen has seen the paper value of its investment rocket since then.
The company sold shares on Tuesday at 46.5p.
It acquired its first holding in Hurricane at 15p per share.
Kerogen is thought to have invested around £88m in Hurricane.
The company retains a 16 per cent stake in Hurricane. This is worth around £150m based on the closing price of Hurricane shares yesterday.
Read more: Shetland oil firms hails 'world class productivity' at bumper field
Hurricane said Kerogen had signalled its continued support for the company by remaining a major shareholder, with a representative on the company’s board.
Kerogen’s support has helped Hurricane chief executive Robert Trice put a new geological area
on the map for the industry at Hurricane.
The company’s success has encouraged other firms to invest in the West of Shetland area. Some sector watchers hope finds off Shetland could support a new generation of North Sea activity
The scale of interest was underlined last year when industry
heavyweight Spirit Energy bought in to Hurricane’s acreage.
Spirit, which is part-owned by Centrica, agreed to fund a
$180 million drilling campaign
on another find made by Hurricane and a prospect.
Read more: North Sea deal shows financiers see big potential in acreage off Scotland
Last year oil and gas consultancy Wood Mackenzie said: “All eyes are on West of Shetland.”
Other investment businesses will be hoping to match the success of Kerogen.
A range of private equity players have placed big bets on the North Sea in recent years reflecting their belief that the shake-up triggered by the crude price plunge had created attractive investment opportunities.
The resulting slump led to falls in the prices of assets and the cost of services such as rig hire.
Chrysaor Energy bought big North Sea portfolios from Shell and ConocoPhillips in multi-
billion deals after winning support from private equity firms.
Read more: $2.7bn deals creates new North Sea giant
The Neptune Energy business led by former Centrica boss Sam Laidlaw has established a big North Sea position through acquisitions with private equity backing.
Kerogen has followed a riskier strategy by backing smaller firms with relatively high exposure to exploration and development work, rather than helping firms buy big production operations.
It has also invested in Zennor Petroleum, which plans to develop the Finlaggan field discovered by ConocoPhillips in 2005.
With offices in London and Hong Kong, Kerogen is believed to have acquired its holding in
Hurricane at a weighted average price of around 20.6p per share.
Hurricane Energy shares closed down 3.5p at 47p yesterday.
That left the firm with a
stock market capitalisation of £935m.
The Brent crude price fell 3% on Tuesday after President Trump said “a lot of progress” had been made in America’s stand-off with Iran. Brent crude sold for $64.23 per barrel, down 12 cents, yesterday afternoon.
It sold for $75/bbl in April.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here