By Mark Williamson
ISRAELI oil firm Delek has underlined its readiness to increase investment in the North Sea after completing a $2 billion (£1.6bn) acquisition in the area.
Delek bought the North Sea portfolio amassed by America’s Chevron, which has decided to focus on the shale fields of its home country.
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The deal, which was agreed in May, forms part of a shakeup in the North Sea that is set to continue as Centrica looks to pull out of the area.
The Scottish Gas owner is trying to drum up interest in the North Sea-focused Spirit Energy business it decided in July to offload.
Reuters reported that Centrica has sent details of the Spirit portfolio to prospective buyers.
The portfolio includes stakes in acreage West of Shetland on which Spirit enjoyed a drilling success with Hurricane Energy in September. It also includes assets acquired by Centrica with the Aberdeen-based Venture Production business it bought for £1.3bn in 2009.
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However, Delek has provided evidence that other businesses see big opportunities in the area.
Delek moved into the North Sea under a plan to build a global exploration and production business after a pioneering exploration drive in the Mediterranean.
It bought North Sea-focused Ithaca Energy in 2017 in a deal that valued the firm at £1bn.
The Chevron deal has made Aberdeen-based Ithaca one of the biggest players in the North Sea outside the ranks of the majors, with 500 staff joining from the US giant.
Delek’s chief executive Asi Bartfeld said yesterday: “The acquisition has established Ithaca Energy as a leading UK North Sea oil and gas company with a strong outlook and the opportunity set from which to deliver material value to the Delek Group and enhance its presence in the global energy markets.”
Delek noted the acquisition provided “a material and important step up in the scale and breadth of the Company’s asset base, adding ten additional producing field interests to the existing portfolio, along with a wider portfolio of investment opportunities”.
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Ithaca Energy boss Les Thomas said: “We have a highly experienced organisation that is well set-up to deliver upon our investment plans and secure the future success of the business. With this exciting backdrop, we look forward to contributing to the industry’s objective of maximising economic recovery for the UK North Sea over the years to come”.
When the deal with Chevron was announced Delek said it saw exciting growth opportunities in the North Sea.
Mr Thomas has made clear Ithaca expects to be able to make more from the portfolio than Chevron has done, by investing in projects that may not be material to a firm of the US giant’s scale.
This could include boosting output from existing fields, bringing undeveloped finds into production and trying to make new discoveries.
North Sea industry leaders hope transfers of ownership could encourage investment in the area.
Oil and gas firms slashed investment off the UK in response to the sharp fall in the oil price from summer 2014 to early in 2016.
Activity has started to pick up following the partial recovery in the crude price in recent months. However, it remains well below the levels recorded during the boom that ended in 2014.
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Delek has signalled that it could buy more North Sea assets. On its website the company says: “We continue evaluating numerous further opportunities in the North Sea and North America.”
Spirit could attract interest from private-equity backed firms that have expanded rapidly though acquisitions in the North Sea in recent years.
These include Chrysaor Energy which has bought big portfolios from Royal Dutch Shell and America’s ConocoPhillips.
Reuters said Spirit could be valued at £1.5bn, citing unnamed sources.
It noted that Spirit produces around 130,000 barrels oil equivalent daily.
Centrica has a 69% stake in Spirit with the remainder held by Germany’s Stadtwerke Muenchen group.
Reuters said Delek plans to float Ithaca on the London Stock Exchange.
Production from the Chevron assets bought by Delek averaged around 60,000 boepd in the first quarter.
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