EDINBURGH-based Capricorn Energy has highlighted how much money firms are making in the North Sea as it underlined its appetite for acquisitions.
The former Cairn Energy said it expects to benefit from “material” payments linked to the profitability of North Sea operations that it sold last year.
The company sold interests in two big producing fields to Waldorf Production in March last year for an initial $460 million, under a deal that put it in line for further payments based on production and oil price levels.
Prices have surged following the deal amid the recovery from the pandemic and the fallout from the war in Ukraine.
Brent crude sold for around $106 per barrel yesterday compared with $70/bbl in March last year.
READ MORE: Shell underlines value of North Sea after profits hit 14-year high
North Sea-focused Harbour Energy provide further evidence of the scale of the boost provided to oil firms yesterday when it said it expects to generate up to $1.7 billion (£1.3bn) cash flow from its operations this year, after planned dividend payments of $200m and tax charges.
The announcements by the firms could fuel calls for a windfall tax to be imposed on oil and gas firms to help fund cuts in energy bills for consumers.
Asked about the prospect, Capricorn chief executive Simon Thomson said: “What we want is fiscal stability because we’re planning to invest for the long term … The one thing you want as an investing company is certainty around the regulatory terms.”
Mr Thomson noted other countries are considering imposing windfall taxes.
After telling the company’s general meeting that Capricorn is in growth mode and has the balance sheet strength to “go out and acquire”, Mr Thomson said it would be in the market for North Sea deals.
Capricorn bought stakes in five North Sea exploration licences containing gas prospects from Deltic Energy in August.
Mr Thomson highlighted the appeal of gas opportunities in the North Sea amid the official drive to reduce the UK’s dependence on imports and to cut emissions.
“The Deltic thing is a really interesting opportunity,” he told reporters. “It’s gas; it’s a new play type. If it works you could tie it back quickly to existing infrastructure and be part of what everybody’s trying to achieve in terms of that balance between energy security, energy affordability and energy transition.”
READ MORE: North Sea minnow steps up exploration drive with heavyweight backing
Capricorn is evaluating new 3D seismic data across the Deltic acreage in preparation for a drilling decision later this year. It plans to start drilling the Diadem exploration well east of Aberdeen in the current quarter.
Mr Thomson said Cairn is eyeing potential acquisitions in a range of countries. It could do more deals along the lines of the $320m acquisition of producing assets in Egypt from Shell clinched in March last year. The Egyptian assets have performed well and Capricon sees potential to increase output from them.
Capricorn received $1.06bn from the Indian Government in February in respect of a long-running tax dispute. It will pay up to $700m of the proceeds to investors.
The group made big finds in India as Cairn Energy under its founder Sir Bill Gammell. Mr Thomson succeeded Sir Bill as chief executive in 2011. Cairn changed its name to Capricorn Energy in December.
Harbour developed out of the Chrysaor Energy business, which bought big North Sea portfolios from Shell and ConocoPhillips. The business acquired Premier Oil last year.
READ MORE: Upheaval at North Sea heavyweight
It started production from the giant Tolmount gas field in April. Chief executive Linda Cook said: “We continue to invest in high return, infrastructure-led opportunities within our asset base to sustain production while at the same time generating material free cash flow.”
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