Parkmead secures flow of oil with North Sea deal

North Sea driller Parkmead yesterday moved to swell its revenue stream and fund its exploration programme as it tripled its stake in the established Athena oil field.

Parkmead chief Tom Cross said the stake would boost the firms cashflow. Picture: Contributed

The Aberdeen-based firm, which is run by Dana Petroleum founder Tom Cross, is buying a further 20 per cant stake in the field from German outfit EWE for $11.2 million (£6.8m).

Cross – who has been building up Parkmead through a series of acquisitions since selling Dana for almost £2 billion in 2010 – said: “This is Parkmead’s most important deal to date. Increasing our oil production three-fold from the Athena field will deliver major growth in the company’s revenue and cashflow.”

Production from Athena averaged about 9,000 barrels of oil per day in the second quarter of 2013, but the field is currently producing at a reduced rate after hitting operational difficulties.

Operator Ithaca has a work programme planned for 2014 to raise production back up to normal levels.

Parkmead said its increased interest in the field “will provide the company with significant growth in production revenues and operating cashflows”, and “fits perfectly into Parkmead’s strategy to become a key exploration and production player in the North Sea”.

The company already owned 10 per cent of Athena following its acquisition of Lochard Energy earlier this year. The latest acquisition will therefore treble Parkmead’s stake to 30 per cent.

The firm will pay EWE $8m in cash and hand over $3.2m-worth of new Parkmead shares, based on the closing price on the last business day before the deal completes.

The increased revenues from Athena are expected to underpin Parkmead’s exploration programme. The group was awarded a total of 30 blocks spanning eight areas in the UK’s latest licensing round.

They include relatively unexplored areas west of Scotland and of the Shetland Islands, which are thought to have the potential for major oil finds.

Cross also made clear last month that he retains his appetite for acquisitions. In addition to the Lochard buyout, he has also snapped up rival Deo Petroleum and a portfolio of assets in the Netherlands since taking charge at Parkmead in 2011.

Parkmead also operates the Greater Perth oil area, and has a number of exploration prospects in the Central and Southern North Sea.

The latest deal came as fellow Aberdeen firm Faroe Petroleum announced that drilling had started on its latest prospect, the Centrica-operated Butch East exploration well in the Norwegian North Sea.

The well would be a convenient addition to the main Butch discovery, made in 2011, and close to close to significant existing offshore infrastructure. There are plans for two further exploration wells in the vicinity. Faroe has a 15 per cent share of both Butch and the new well to the east and is working on development plans for the field.

Chief executive Graham Stewart said: “If successful, Butch East offers the potential to substantially add to the value of the Butch field.”

The well is Faroe’s third in its current exploration programme.