Total To Sell North Sea Assets to Petrogas (Update)
(Adds comment from Wood Mackenzie)
Total announced July 10 that it has agreed to sell a package of UK North Sea assets to Oman’s Petrogas for $635mn.
The French oil and gas giant will divest its interests in assets in the eastern North Sea that it bought from Maersk Oil in 2018. That deal made the French firm the second-largest operator in the area. The deal will help allow the company to rebalance its financial position as it pushes capital into other projects.
The package includes 100% interests in the Dumbarton, Balloch, Drumtochty and Lochranza fields. Stakes of over 60% in the Affleck, Flyndre and Cawder fields will also swap hands, as will a 31% interest in Cawdor field, a 5% stake in Scott and a 2% interest in Telford.
“This transaction is consistent with our portfolio management strategy, aiming at lowering our break-even point by optimising capital allocation and divesting high technical costs assets,” said Total’s president of exploration & production Arnaud Breuillac. “Our primary objective is to maintain the organic break-even before dividend below $30 per barrel and high-grading our portfolio will help us achieve this.”
Total retains a sizable presence in the North Sea. Culzean, which started up in UK waters last month, is expected to produce 5% of total UK gas demand at its peak. In Norway, Johan Sverdrup expects to reap its first oil later this year.
The French company said the deal has an effective date of January 1, 2019. The transaction remains subject to approval from the relevant authorities and is expected to close in December.
Wood Mackenzie said the assets will produce 25,000 barrels of oil equivalent/day (boe/d) this year, roughly equally split between oil and gas. The assets hold over 30mn boe in remaining reserves. Several of the fields are due to cease production by 2025 and have near-term decommissioning liability. The new operator will no doubt aim to extend the life of these fields with fresh investment, it said.
Petrogas produces 35,000 boe/d from onshore Oman and offshore Netherlands. The company entered the North Sea and became an offshore operator through its acquisition of Chevron’s Dutch portfolio in 2014. Since then, it has contributed to reserves growth in a portfolio of mid-late life assets using its strong exploration background. This deal transforms its production profile, remaining reserves and value. It has a strategy of expanding overseas and the North Sea is becoming a core area of focus, WoodMac said.