Shell to offload US$3bn package of North Sea assets to Chrysaor

Royal Dutch Shell Plc (LON:RDSB) is offloading a package of North Sea assets to Chrysaor in a deal worth US$3bn.

It the latest deal in which a multinational oil major is divesting North Sea assets to a more targeted independent oil firm – following last week’s smaller deal between BP and EnQuest for the Magnus field.

Chrysaor, which is backed by private equity investors, is acquiring Shell’s interests in several fields (Beryl, Bressay, Buzzard, Elgin-Franklin, Erskine, Everest, the Greater Armada cluster, J Block, Lomond, plus a 10% stake in Schiehallion) and it says the deal turns it into UK’s leading independent oil & gas company.

• EnQuest deals into BP’s Magnus field in North Sea
• Hurricane Energy and EnQuest are London’s standout E&Ps
• Jersey Oil & Gas seen as a ‘buy’ ahead of Statoil’s summer drilling 

Indeed, the assets yielded some 115,000 barrels of oil equivalent per day during 2016 and account for some 350mln barrels of proven and probable reserves.

Chrysaor indicates that it will invest in the acquired assets. The company says there are a number of early incremental opportunities to maximise economic recovery and extend field life, and its efforts will see new drilling activity in the North Sea.

The deal also brings a number of key senior staff from Shell into Chrysaor, and some 400 other employees may also transfer.

“Chrysaor is acquiring a high quality package of assets which combine low cost production, a substantial reserves and resources base with strong cash flows and a highly competent and skilled workforce. 

“These assets, combined with our own experience and the outstanding team who will transfer from Shell, provide an excellent platform for change and growth in the North Sea.”

Shell is providing Chrysaor with junior debt financing to support the deal, meanwhile EIG Global Energy Partners vehicle is providing the independent oiler with US$1bn of funding and a US$1.5bn reserves based loan will be syndicated.

Shell also retains a US$1bn fixed decommissioning liability related to the assets, though Chrysaor notes that no material decommissioning costs are expected in the near term and some assets are still forecast to produce for more than 20 years.

A new North Sea ‘champion’

“This acquisition reflects Chrysaor’s and Harbour’s belief that the UK North Sea has material future potential for oil and gas production,” Kirk said.

“The UKCS has benefited from Government action to improve the regulatory and fiscal environment in the North Sea and we look forward to working with them in the future. 

“We intend to create a UK champion, with the skills and resources of a major independent oil and gas company, to help ensure that the basin’s future potential is realised safely, profitably and in alignment with the Government’s policy of driving investment and maximising economic recovery”.

Linda Cook, Chrysaor chairman, meanwhile, added: “The North Sea has undergone a revolution in recent times with operating costs falling to competitive economic levels, and we believe this signals a moment for a generational change in the basin.

“Chrysaor, backed by Harbour, will form a platform for significant growth in the region.

“We look to acquire further assets that are material to our business as we bring to bear energy, skills and additional investment to enable the company to perform to full potential.”

Story by ProactiveInvestors