Chrysaor to buy ConocoPhillips’ entire UK North Sea portfolio

Chrysaor Holdings Ltd. has struck a deal to acquire ConocoPhillips’ UK North Sea oil and gas business for $2.675 billion.

Apr 18th, 2019

Offshore staff

LONDONChrysaor Holdings Ltd. has struck a deal to acquire ConocoPhillips’ UK North Sea oil and gas business for $2.675 billion.

The assets contain more than 280 MMboe of proved and probable reserves and produced around 72,000 boe/d last year.

They will lift Chrysaor’s pro forma 2018 production to 177,000 boe/d, making it one of the largest offshore oil and gas producers in the UK North Sea.

Pending regulatory approval and satisfaction of other conditions, the transaction should be completed in late 2019.

ConocoPhillips will retain its London‐based commercial trading business and its interest in and operatorship of the Teesside oil terminal in northeast England.

Chrysaor now expects its 2019 production to exceed 185,000 boe/d, boosted by drilling and development activity across its existing and new fields.

The company will gain operatorship of two producing oil and gas hubs in theUK central North Sea – Britannia and J‐Block – and it sees potential in both cases for further near-field tie-ins and reserve replacement.

In addition, Chrysaor will now be partner to BP in theClair field west of Shetland (the two companies are already partners in the nearby Schiehallion field).

In the southern gas basin, the company will assume responsibility for ConocoPhillips’ decommissioning programs on various tail-end fields, and it expects the project to be substantially completed by 2022.

Chrysaor is supported financially by Harbour Energy, a capital energy investment company managed by EIG Global Energy Partners. The company said it would fund this acquisition from its existing cash resources and a Reserve Based Lending debt facility underwritten by Bank of Montreal, BNP Paribas, DNB Bank, and ING Bank.

Phil Kirk, chief executive, said: “This significant acquisition reflects our continuing belief that the UK North Sea has material future potential for oil and gas production… These assets complement our existing operations and, with operating costs at less than $15/bbl across the enlarged group, our portfolio delivers high margins and significant positive cash flow.

“In the central North Sea, we will own a range of operated hub infrastructure providing access points in an area with the largest undeveloped contingent and prospective oil and gas resource base in the UK. In the west of Shetlands region, we have secured long life cashflows from two world‐class fields operated by BP.”

ConocoPhillips UK’s workforce will transfer to Chrysaor.

Romana Adamcikova, senior analyst, North Sea upstream atWood Mackenzie, claimed the deal would in fact turn Chrysaor into the UK’s top producer this year and keep it in the top tier of UK producers for the next few years.

“Considering the company was a relatively small producer before it acquired a batch of assets fromShell in 2017, this is a story of incredible growth.”

Chrysaor previously bought BG’s older North Sea assets following the latter’s takeover by Shell. It has since invested to increase production at the Greater Armada Area in the central sector, which had been facing decommissioning under its previous owner.

“It could take a similar approach here,” Adamcikova said, “particularly with it now becoming operator at the Britannia and J-Area hubs in the central North Sea, which have potential for further growth.

“ConocoPhillips is shifting its focus towards lower cost opportunities elsewhere in the world, particularly in the US. Among such a wider global portfolio, UK fields would have struggled to compete for capital.”

Adamcikova suggested that Chrysaor make further moves in the near future to further boost its mid- to long-term production outlook.

04/18/2019

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