UK independent Chrysaor has completed its $2.68 billion acquisition of ConocoPhillips’ UK North Sea assets.
Chrysaor chief executive Phil Kirk told Upstream on Monday he was pleased to have completed the deal for the assets, which were the “top of the list” for Chrysaor's second major acquisition after its first in 2017 when it bought a package of North Sea fields from Shell for $3.8 billion.
“The fit was pretty obvious,” Kirk said.
The transaction adds two new operated hubs to Chrysaor’s portfolio in the UK central North Sea — Britannia and J-Block — in addition to an interest in the BP-operated Clair field in the west of Shetland area.
Kirk said: “The story is all about investment. We really like the ‘to-do list’ around the J-Block. We really like the longevity around Clair.
“We think there is much more to do around Britannia, which we look forward to chasing after.
“We are going to be investing at higher levels than the previous owners and partnerships."
Kirk repeated that he expects capital investment across the combined portfolio to be in the region of about $800 million to $1 billion per year for the next few years, a figure he first revealed in an interview with Upstream at the end of last month.
“We do see the opportunity to make that a sustainable investment level,” he said.
Output from the ConocoPhillips assets in the first six months of 2019 was 72,000 barrels of oil equivalent per day, the companies said on Monday, almost six months after the deal was first announced.
Combined with its existing portfolio, private equity-backed Chrysaor's first-half 2019 production averaged 195,000 boepd.
Kirk said there have been some days in the second half of the year “comfortably above 200,000 boepd” despite shutdowns and maintenance turnarounds across Chrysaor's own operated assets and those in which it is a non-operating partner.
The chief executive said he expects output in 2020, when more maintenance shutdowns are expected, including at Britannia, Everest, Lomond and Armada, as well as the major three-week shutdown of the Forties Pipeline System, to be in the range of 180,000 to 190,000 boepd.
“I would be pretty happy with that because there is a big maintenance programme next year,” he said.
Kirk said Chrysaor’s priority was the safe integration of the two businesses, which he admitted will be “complicated”.
"As we enter a new chapter for Chrysaor we look forward to welcoming our new colleagues,” he said.
He insisted there is “no target for job cuts” but said he was “sure there may well be some duplication across the organisation”.
“But we have got to pull two different systems together. That is going to take undoubtedly until the end of 2021,” he said.
“We have no target for headcount level at the moment. We are going to really concentrate on the safe, early-stage integration and understanding how they work and how we might fit best together and what the to-do list is, which is what it is really all about.”
He also said that while the priority is the integration of the two businesses, Chrysaor’s shareholders are “very supportive” of looking for further acquisitions.
“We will always look at the right deals that fit with the existing portfolio and the existing organisation,” he said.
“So, we continue to look but it will always be in the context of running a safe operation and not trying to do much.”
Kirk expects Chrysaor’s earning before interest, tax, depreciation and amortisation will be about "$2 billion per year for the next few years”.
“That’s a pretty substantial level. We are not aggressively financed on the back of that and have spare facility and cash even after day one after the deal,” he said.
The transaction does not include ConocoPhillips’ London-based commercial trading business or its interest in the Teesside oil terminal.
ConocoPhillips chief executive Ryan Lance said: “We are pleased that Chrysaor recognises the value of our UK exploration and production assets, and will continue their development in the future.
“Our business legacy in the UK reflects a 50-year history of achievement and operational excellence. Our workforce there should be proud of their accomplishments, and we look forward to maintaining our commercial trading business in London and continuing as operator of the Teesside oil terminal.”
Chrysaor, backed by Harbour Energy and EIG Global Energy Partners, is funding the latest deal from its existing cash reserves and a $3 billion debt facility underwritten by Bank of Montreal, BNP Paribas, DNB Bank and ING Bank.
BMO Capital Markets Limited and Jefferies International acted as joint financial advisers.
Chrysaor’s first major North Sea asset deal happened two years ago when it acquired a package of assets from Shell for $3.8 billion, promising at the time to become a “new champion” for the next phase of the UK North Sea industry’s development.
The Shell deal gave Chrysaor operated interests in the Greater Armada cluster and the Everest and Lomond facilities, as well as an attractive non-operated portfolio, including interests in CNOOC International’s prolific Buzzard field, the Apache-owned Beryl area, Total’s Elgin-Franklin complex and in the Schiehallion field, part of BP’s Quad 204 scheme.