Ithaca buys Chevron North Sea in $2 billion oil deal

Ithaca Energy has swooped on a North Sea rival in a multi-billion-dollar deal set to quadruple its production forecast in 2019.

The deal will include Chevrons majority stake in the Captain oilfield. Picture: Contributed

The UK-focused oil and gas operator, which is owned by Israel’s Delek Group, has acquired US major Chevron’s North Sea business (CNSL) for $2 billion (£1.6bn).

The deal adds a further ten oil and gasfields to Ithaca’s portfolio, driving up its proven and probable reserves by 150 per cent and resulting in a 300 per cent increase in its predicted output for the current year.

Around 500 employees will transfer to Ithaca as part of the deal, of which an estimated 200 work offshore on the operated assets.

Upon completion, the group’s enlarged portfolio will encompass 18 producing fields.

Ithaca forecasts that it will deliver pro-forma 2019 production of approximately 80,000 barrels of oil equivalent per day, at an operating cost of around $17 per barrel of oil equivalent.

The agreement includes CNSL’s majority stakes in the Captain and Alder fields, and its 50 per cent shares in the Erskine and Enochdhu assets. It also comprises stakes in Alba, Britannia, Brodger, Callanish, Elgin/Franklin and Jade.

The transaction has an effective date of 1 January 2019 and is expected to complete around the end of the third quarter of 2019, subject to regulatory approval.

It represents the latest North Sea retreat by a US energy group, after ConocoPhillips offloaded its UK oil and gas business to Chrysaor Holdings last month in a deal worth almost $2.7bn.

Analysts at Wood Mackenzie, the Edinburgh-based energy consultancy, said it had recently identified the UK as one of nine countries considered “peripheral” to CNSL due to lack of scale and growth potential, as the group looks to hit its disposal targets.

They said: “Chevron has a disposal target of $5bn to $10bn between 2018 and 2020. Its total asset sale proceeds since the beginning of 2018 are $2.3bn. This transaction will bring Chevron within a whisker of hitting the low end of its target range over a year early.

“Chevron will be left with a 19 per cent stake in the Clair field once the deal closes and a complete exit from the UK is looking increasingly likely.”

Ithaca chief executive Les Thomas said: “The acquisition is a significant step forward in the long-term development of Ithaca Energy and underlines our belief in the North Sea, particular in the UK Central North Sea where the enlarged business will own a range of interests in a number of key producing assets.

“We are very pleased to be acquiring a high quality portfolio of assets and experienced operational organisation that fits well with our existing business.

“Like our current portfolio, the production and reserves base is heavily weighted towards operated asset positions, which provides us with the ability to actively prioritise and unlock the full potential of the business.”

Asi Bartfeld, Delek Group chief executive, added: “We see exciting growth opportunities in the North Sea and are looking forward to working with Ithaca to deliver upon our value and growth targets.”