A leading Scottish oil firm, Capricorn Energy, has underlined the appeal of investing in the North Sea, amid the prospect of disruption to supplies following Russia’s assault on Ukraine.
The former Cairn Energy said a range of factors combined to make the North Sea an attractive place to invest as the company said it was in the market for acquisitions that would allow it to increase production.
Chief executive Simon Thomson confirmed the Edinburgh-based company might buy more assets in the North Sea, after acquiring exploration acreage in the area last year.
He noted the factors in the North Sea’s favour include the speed with which finds can be brought into production in the area.
“The good thing about the North Sea is there is a plethora of existing infrastructure which can be used and also repurposed,” he told journalists.
He added: “The focus of the industry where it can help is on focusing on those areas where there is fast tie-back using existing infrastructure.”
READ MORE: North Sea oil services firms win backing amid Ukraine turmoil
Asked whether the war in Ukraine had made it more important for North Sea assets to be developed Mr Thomson expressed sadness about the “awful” events in the country and his hopes that the conflict would end as quickly as possible.
He observed: “In terms of the UK we’ve been pretty consistent in saying there’s three things that are important: There’s security of supply, affordability and of course emissions related to that.
“We continue to see the North Sea as an attractive investment destination.”
Mr Thomson made the comments after Capricorn published annual results which he said covered a transformational year.
READ MORE: Edinburgh oil firm gets long-awaited $1bn tax refund in India
After reshaping its portfolio and securing a $1 billion tax refund from the Government of India, Mr Thomson believes Cairn has the balance sheet strength to support acquisitions while also allowing the company to make big payouts to investors.
He declared: “The most important point to make is that Capricorn is in growth mode.”
Last year Capricorn sold stakes in two big North Sea fields on which it reckoned production had peaked for $460 million and used the proceeds to fund the $323m acquisition of a portfolio of Egyptian assets from Shell.
Mr Thomson said the Egyptian assets have performed well. He noted the potential to increase output from existing finds and to make new ones.
Capricorn got an average $77.80 per barrel for its Egyptian output last year, during which production costs averaged just $6 per barrel of oil equivalent.
Oil and gas prices have increased dramatically following the start of the war in Ukraine.
Brent crude sold for $132.05/bbl yesterday afternoon, up $8.84/bbl on the day, after President Biden banned imports of Russian oil and gas into the US. Business minister Kwasi Kwarteng said the UK will phase out oil imports from Russia this year.
READ MORE: Drax boss says energy giant could invest £500m in Argyll hydro plant with right support
Capricorn also demonstrated its faith in the exploration potential of the North Sea last year by buying into acreage containing gas prospects that had been worked up by a relative minnow, Deltic Energy. It has agreed to drill a well on the Diadem prospect with Shell.
Mr Thomson noted that Capricorn would expect to be able to develop North Sea finds deemed commercial relatively quickly.
He said Capricorn is “very actively looking” for suitable acquisitions, with a focus on producing assets. Majors have put a range of assets up for sale around the world.
Capricorn is in line to get further payments in respect of the UK assets it sold last year, and interests in Senegal disposed of previously, dependent on oil and gas prices.
The company made $895 million profit in 2021 after losing $394m in the preceding year.
The result reflects the benefit of the $1billion settlement received last month from the Government of India following the end of a long-running tax dispute.The company plans to pay out up to $700m of the proceeds to shareholders.
An international tribunal found in its favour in 2020 in respect of the dispute, which concerned events leading up to the flotation in India of Capricorn’s former subsidiary in the country in 2007. That business owns finds Capricorn made in India during its Cairn Energy days, under its founder Sir Bill Gammell. Mr Thomson succeeded Sir Bill in 2011.
Capricorn has interests in a wide range of countries, including Israel and Mexico.
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 hereLast Updated:
Report this comment Cancel