Chrysaor steps into limelight

Private company becomes major North Sea player overnight with purchase of number of Shell assets

Private player Chrysaor is preparing plans to boost production from a major package of North Sea assets it has bought from Shell in a deal worth up to $3.8 billion that has propelled it overnight into one of the UK North Sea’s leading players.

Chief executive Phil Kirk said he is aiming to turn the private equity-backed company into a “UK champion, with the skills and resources of a major oil and gas company”.

Kirk told Upstream Chrysaor is planning, once the deal closes and regulatory hurdles are passed, to spend more on the operated assets than the Anglo-Dutch supermajor was likely to do.

The package of assets being bought from Shell includes stakes of:

• 39.4% in Beryl

• 18.4% in Bressay

• 21.73% in Buzzard

• 14.1% in Elgin-Franklin

• 32% in Erskine

• 100% in Everest

• 76.4% in the Greater Armada cluster

• 30.5% in J Block

• 100% in Lomond

• 10% in Schiehallion.

The firm price is $3 billion, with a possible additional $600 million between 2018 and 2021 depending on commodity prices, and up to $180 million more for future discoveries.

Kirk said the package of Shell assets is “very much bespoke” and the company has “identified a number of early incremental opportunities to maximise recovery and extend field life”.

“We have got infill wells. We have got tie-backs. We’ve got potential development opportunities,” Kirk said.

“We do have a programme of six to eight operated wells that we would be looking to execute after completion that are primarily fallow discoveries and step-out targets that can be tied back or need a little appraisal and then would almost immediately be tied back to owned infrastructure.

“We are going to be focused on things we own and filling the process facilities we operate because that is easier and quicker and safer.

“The forward plan on the operated assets is spending more money than is currently intended [by Shell], subject to regulatory approval and us getting the keys. That’s part of the value story.”

The package contains three operated assets — Lomond, Everest and Armada, formerly owned by BG Group before its takeover by Shell.

Kirk said recent improvements in uptime at Lomond and Everest would be an attractive proposition for third-party field owners in the area, and Chrysaor would be encouraging fresh business there.

The assets being bought from Shell are about 25% operated by production, but Chrysaor is keen to increase this.

“We like control, we like operatorship, we like to help people,” Kirk said. “I think we would like to build our operated part of the portfolio up towards closer to the 50:50 level in the medium term, and some of the acquisitions that we will be looking at will be focused on that.”

New chairman Linda Cook, who is also chief executive at financial backer Harbour Energy, said the acquisition will likely be followed by others from the pure North Sea player.

“This is the first of several acquisitions,” she told Upstream. “Our plan now is to not just pursue opportunities embedded in this portfolio but supplement it with a range of acquisitions, maybe bolt-on or acquisitions of nearby properties. We’re already in the process of looking at other nearby packages that will broaden and deepen our portfolio.”

The Shell assets produced 115,000 barrels of oil equivalent per day last year, with 350 million barrels of oil equivalent of proven and probable reserves.

However, the deal is far from representing an exit from the UK North Sea for Shell, which is retaining operated producing assets at Brent Charlie, Gannet, Curlew, Nelson, Shearwater and the ONEGas assets in the southern North Sea.

It also has the operated Penguins development, the undeveloped Jackdaw asset, and non-operated assets in the Clair area, Quad 204, Bittern, Etap and Kingfisher.

Although the deal will see Shell lose about 50% of its 2016 UK North Sea production, output will increase once BP’s duo of Quad 204 and Clair Ridge come online.