Oil giant BP agrees $625m deal to sell North Sea fields to Premier

Oil major BP has sealed a bumper $625 million (£475m) deal to sell a string of fields in the North Sea as the big players continue to hand over their interests to smaller producers.

BP remains a major North Sea player with the likes of the Etap (Eastern Trough Area Project) hub. Picture: Andy Buchanan/PA Wire

London-listed Premier Oil will buy the Andrew Area and Shearwater sites from BP, hoping to capture the 82 million barrels of oil and equivalents, thought to still be trapped under the ground.

The Andrew Area encompasses five oil fields, with a stake of between 50 per cent and 100 per cent in each, Premier said. It also includes a 25 per cent interest in the Shearwater infrastructure hub.

The firm’s chief executive, Tony Durrant, said: “These acquisitions are materially value accretive for Premier and are in line with our stated strategy of acquiring cash generative assets in the UK North Sea.

“We look forward to realising the significant long-term potential of the Andrew and Shearwater assets through production optimisation, incremental developments and field life extension projects.”

Premier will also increase its interest in the Tolmount Area for $191m and make contingent payments of up to $55m.

Durrant added: “We are also pleased to have consolidated our interest in the high return Tolmount development where we see material upside. The cash flow generated from the acquired assets will also accelerate the deleveraging of Premier’s balance sheet.”

Reshaping

Ariel Flores, BP North Sea regional president, said: “BP has been reshaping its portfolio in the North Sea to focus on core growth areas, including the Clair, Quad 204 and Etap hubs. We’re adding advantaged production to our hubs through the Alligin, Vorlich and Seagull tieback projects.

“As a result of this focus, we have also now decided to divest our Andrew and Shearwater interests, believing them to be a better strategic fit for another owner

“We are confident that Premier Oil, already a significant operator in the North Sea, is the right owner of these assets as they seek to maximise their value and extend their life.”

The cost of the acquisition works out at less than $10 per barrel of oil, while it will cost Premier around $20 to extract it from the ground. This means that as long as the price of oil stays above $30, the driller will be able to make a profit.

The deal comes as the price of oil pushed above $70 per barrel on Monday, as traders fear that tensions in the Middle East could cut off supplies form the vital region.

In December 2018, BP increased its interest in the giant Clair field west of Shetland from 28.6 per cent to 45.1 per cent.

The Clair field is being developed in phases – Clair Ridge, the second phase development, started up in November 2018, targeting some 640 million barrels of oil and peak production of 120,000 barrels of oil a day. A third phase, Clair South, is under consideration.

The oil giant is also delivering a programme of subsea tiebacks in the North Sea.

Meanwhile, Offshore industry body OGUK has named two new directors as it looks to ramp up its green credentials.

The representative organisation for Britain’s offshore oil and gas industry said it was kicking off the new year with plans to “champion the sector as part of a diverse energy mix”.

The two directors will join OGUK’s leadership team under the continued direction of chief executive Deirdre Michie.

Trevor Stapleton becomes the body’s health, safety and environment (HSE) director while Katy Heidenreich is confirmed as operations director. Both directors will commence their new roles on 3 February.

Further changes at OGUK – also known as Oil and Gas UK – see Matt Abraham take on “a more focused brief” as supply chain and exports director. Mike Tholen becomes sustainability director, using his “deep experience in the industry to help drive action to deliver a net zero basin”.

Graham Elgie continues as the body’s finance and corporate services director and Gareth Wynn as OGUK’s stakeholder and communications director.Michie said: “2020 is synonymous with perfect vision and we are wasting no time in getting to work delivering industry’s ambitious plans for the future outlined in Roadmap 2035: a blueprint for net zero.

“These changes to our leadership team… will enable us to even better support companies and to help drive action as we work to inform, engage and advocate the importance of this industry as part of a diverse energy mix.”