Sunday, 26 May 2019

Finance News

Chrysaor to Acquire ConocoPhillips’ UK Oil & Gas Business

Chrysaor Holdings Limited is to acquire ConocoPhillips’ UK oil and gas business for $2.675 billion.

The assets being acquired produced approximately 72,000 barrels of oil equivalent per day (boepd) in 2018. This acquisition increases Chrysaor’s pro forma 2018 production to 177,000 boepd, making Chrysaor one of the largest oil and gas producers in the UK North Sea. The transaction has an effective date of 1 January 2018 and is expected to complete in late 2019, subject to regulatory approval and other specific conditions precedent. ConocoPhillips will retain its London‐based commercial trading business and its interest in and operatorship of the Teesside oil terminal.

The acquisition of ConocoPhillips UK accelerates the execution of Chrysaor’s strategy to become one of Europe’s leading independent, full cycle exploration and production companies. As at the effective date, ConocoPhillips UK assets contain over 280 million barrels1 of oil equivalent (“mmboe”) proved and probable (“2P”) oil and gas reserves with a further significant contingent resource base.

Including the assets acquired from ConocoPhillips, at 1 January 2019, Chrysaor’s pro forma 2P reserves total over 600 mmboe1. Pro forma production in 2019 is expected to increase to over 185,000 boepd, driven by the active drilling and development programs across the Company’s existing and newly acquired assets.

As a result of this acquisition, Chrysaor will add three material assets to its portfolio. These include two new operated hubs in the UK Central North Sea ‐ Britannia and J‐Block. In addition to the associated high‐quality oil and gas reserve base, these hubs have access to significant contingent resource potential providing near field opportunities for production growth and reserve replacement. The third material acquired asset is an interest in the world class Clair Field area located in the highly prospective West of Shetlands region. This interest and the Clair Field’s prospects for future additional development complement Chrysaor’s existing West of Shetlands position in the Schiehallion Field.

In the UK Southern North Sea, Chrysaor will assume responsibility for an ongoing decommissioning program on ConocoPhillips UK’s end‐of‐life assets. This decommissioning program is very well advanced and proceeding in accordance with ConocoPhillips’ plans. Chrysaor plans to have materially completed execution of this program by 2022, and values decommissioning competency as a long‐term commercial opportunity and enabler in the UK.

Chrysaor is backed by Harbour Energy, a permanent capital energy investment company managed by EIG Global Energy Partners (“EIG’’). Chrysaor will fund this acquisition from existing cash resources and an upsized $3 billion Reserve Based Lending (“RBL”) debt facility underwritten by Bank of Montreal, BNP Paribas, DNB Bank, and ING Bank.

Phil Kirk, Chief Executive, Chrysaor, said:

“This significant acquisition reflects our continuing belief that the UK North Sea has material future potential for oil and gas production. Acquiring ConocoPhillips UK accelerates our strategy and further strengthens our position as one of the leading independent exploration and production companies in Europe. These assets complement our existing operations and, with operating costs at less than $15 per barrel across the enlarged group, our portfolio delivers high margins and significant positive cash flow.

In the Central North Sea, we will own a range of operated hub infrastructure providing access points in an area with the largest undeveloped contingent and prospective oil and gas resource base in the UK. In the West of Shetlands region, we have secured long life cashflows from two world‐class fields operated by BP. Chrysaor’s West of Shetlands position also provides exposure to a developing region with significant interest and momentum from major oil companies. We will seek to build on that through the acquisition of additional interests and acreage.

I am proud we continue to demonstrate our ability to safely and profitably extend field life and increase production from our existing portfolio. This is only possible with the dedication of our staff, contractor colleagues and the supply chain. Through this new acquisition we will be joined by a highly competent workforce from ConocoPhillips UK that shares our attitude to safety and performance. We will have the skills and resources of a major independent oil and gas company and the drive to help ensure the basin’s potential is fully realized.

We see exciting growth opportunities in the North Sea and are looking forward to working with our new colleagues to safely sustain and deliver our value and growth targets.”

Linda Z. Cook, Chairman of Chrysaor, added:

“We are excited to play a role in the natural evolution of the North Sea and to enable the safe transfer of assets from major oil companies such as ConocoPhillips to new, well‐ funded, privately‐owned operators. This process results in a good deal for both the seller and the buyer, with new asset owners such as Chrysaor bringing the strategy and capital required for reinvestment and growth. The outcome is a reinvigorated oil and gas sector, an extension of the producing life of existing fields and the maximization of hydrocarbon resource recovery.”

BMO Capital Markets Limited and Jefferies International Limited are acting as joint financial advisers to Chrysaor.

We aim to keep you updated weekly with relevant information concerning the Offshore Energy Sector.

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