UK offshore independents becoming more ambitious, report finds

Summary graphic of various UKCS metrics split between incumbent companies, new entrant companies backed by private equity and all other new entrant companies. Data labels indicate the underlying values.
Summary graphic of various UKCS metrics split between incumbent companies, new entrant companies backed by private equity and all other new entrant companies. Data labels indicate the underlying values.
Westwood Atlas

Offshore staff

LONDON – E&P companies active on the UK continental shelf (UKCS) since 2008 now control 46% of UK offshore production, according to consultant Westwood Global Energy Group.

Collectively they are producing over 300 MMboe/yr and are controlling over 60% of the 1.7 Bboe of unsanctioned and potentially commercial resources across the sector, claimed Emma Cruickshank, Westwood’s Head of Northwest Europe.

In addition, ‘new entrants’ are ramping up exploration efforts and look set to fund over 16 net UK exploration wells in the next two years, 70% of the total planned.

Westwood’s study found that 170 new companies have entered the UKCS since 2008, of which 72 remain active today. But the success rate of the few wells they drilled was only 15%, compared to the UK average of 27%.

This calls into question the effectiveness of the UK regulatory regime in encouraging so many undercapitalized private companies to acquire exploration acreage, the analyst added.

Since 2008 the new entrants have spent $29 billion on asset and corporate deals and have to date sold $1.1 billion of assets. Only three managed to subsequently exit the sector with a positive return on their investments, while a further 12 have departed as a result of a merger.  

Twenty-three private equity-backed new entrants have spent a total of $11 billion acquiring UK offshore assets, with several high-profile deals completed since 2016. But according to Westwood, aside from Chrysaor, none of these companies has so far made a material impact on the UK’s reserves and production.

Although some of the companies are set to invest in development and exploration, many will look to exit sooner rather than later.

07/16/2019

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