North Sea oil and gas group Parkmead is reaping the rewards of a push into the renewables sector following its multi-million pound acquisition of the Kempstone Hill wind farm near Stonehaven.

In an update to shareholders the group, headed by industry veteran Tom Cross, said the 1.5 megawatt facility has delivered a “significant” but unspecified boost to cashflow following a surge of nearly 250 per cent in the price of power. The price increase took effect at the beginning of August when Kempstone’s annual power purchase agreement was renegotiated.

Parkmead acquired Kempstone in February in a £4.3 million deal aimed at creating a “balanced” energy group, giving it control of its first generating asset. The wind farm produced revenues of £400,000 during the year to September 30, 2021, and in the last 12 months generated 2,850 megawatts of power.

Parkmead said it is assessing a number of opportunities to expand Kempstone, which currently encompasses three wind turbines. This could include the addition of solar power generation, a battery storage unit, or the sale of electricity to local industrial users.

The group said it is also laying the groundwork for possible submission of a planning application for a renewable project at Pitreadie Farm near Banchory, where it acquired two large tracts of land three years ago. Initial feasibility studies have confirmed the potential for a wind farm, though Parkmead is looking to expand this out.

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“The major shift in the electricity generation market has changed the dynamics of renewable projects and Parkmead has decided to progress Pitreadie based on a hybrid of renewable technologies, rather than one just focused on wind,” the company said.

Mr Cross said Kempstone will complement other renewable projects such as Pitreadie that are at an earlier stage in the development process. He also signalled the company’s intention to further expand in the renewables arena.

“We are delighted by the contribution made to date by Kempstone Hill to the group, especially considering the significant upside arising from the increases in wholesale electricity prices seen in the last 12 months," he said.

"The Parkmead team continues to assess all opportunities to expand our renewable energy division, both organically and through acquisition."

Shares in Parkmead closed yesterday’s trading nearly 12% higher at 59.4p as house broker finnCap estimated the group will generate record electricity revenues of £206,000 in the current year, rising to £306,000 in 2023. It further added: “Doubling the power price in our model more than doubles our FY23 EBITDA estimate for Kempstone Hill to £637,000.”

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Elsewhere in the sector, Shell said its profits for the third quarter will be squeezed by a near halving of oil refining margins, crumbling chemical margins and weaker natural gas trading. The warning came after two consecutive quarters of record profits for the energy giant, which like others across the industry has benefitted from soaring wholesale prices.

In an update ahead of its results on October 27, Shell said indicative refining margins dropped to $15 a barrel compared with $28 a barrel in the previous three months amid growing concerns over a global economic slowdown. Indicative margins for chemicals fell into negative territory at $27 per tonne versus a positive $86 in the second quarter as global demand for plastics slumped.

Shell said the drop in refining margins will have a negative impact of between $1 billion and $1.4bn on the segment's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Despite the headwinds, the company is still expected to report net earnings of $10.5bn in the third quarter, down from $11.5bn in the second quarter.