WoodMac: Ithaca-Chevron deal continues UK trend of smaller players taking assets from majors

Following an announcement that Israeli Delek Group will be buying Chevron’s North Sea business through its subsidiary Ithaca Energy, Wood Mackenzie has said that the deal continues the UK trend of smaller companies taking on assets from the majors, which resulted in assets worth over $5 billion change hands in the last few months.  

Delek Group confirmed on Thursday that it will buy Chevron’s North Sea assets in a deal worth $2 billion. The transaction will add a further ten producing field interests to the existing Ithaca portfolio, four of which relate to assets operated by the company, resulting in an approximately 150% increase in the proven and probable (2P) reserves of the company and a 300% increase in forecast 2019 production.

Following the announcement of the deal, Tom Ellacott, senior vice president, corporate analysis at global natural resources consultancy Wood Mackenzie said: “The sale has been on the table for some time.”

“Delek confirmed last month it had made a bid.”

He added: “Chevron has a disposal target of $5 billion to $10 billion between 2018 and 2020. Its total asset sale proceeds since the beginning of 2018 are $2.3 billion. This transaction will bring Chevron within a whisker of hitting the low end of its target range over a year early.”

Ellacott said: “Chevron has a deep portfolio of high-return tight-oil opportunities through its leading position in the Permian basin – this sets a very high bar in the internal competition for capital within Chevron’s portfolio, making regions such as the UK now look more peripheral.”

Greig Aitken, director, corporate analysis, said: “We recently identified the UK as one of nine countries that we considered peripheral to Chevron, due to lack of scale and growth potential.

“Chevron will be left with 19% stake in the Clair field once the deal closes and a complete exit from the UK is looking increasingly likely.”

‘Smaller companies taking assets from majors’

Kevin Swann, senior research analyst, North Sea upstream, said: “The deal continues the UK trend of smaller companies taking on assets from the majors. Following hot on the heels of Chrysaor’s deal with ConocoPhillips, we’ve seen assets worth almost $5 billion change hand in the last few months.

Swann added: “International growth has been a long-term goal for Delek and it understands the UK North Sea well, having acquired Ithaca Energy in 2017. This is a strong portfolio and gives Ithaca operated control of key long-life assets like Captain and Alba.”

Speaking of UK deals, last month we saw another major North Sea deal when ConocoPhillips sold its United Kingdom subsidiaries to Chrysaor for $2.675 billion, plus interest and customary adjustments. The sale is expected to be completed in the second half of 2019.

Following the ConocoPhillips-Chrysaor deal, Wood Mackenzie said last month it would not be surprised to see Chrysaor make further moves to bolster its production outlook.

Chrysaor was a relatively small producer before it acquired a batch of assets from Shell in 2017 and now, through the acquisition of ConocoPhillips’ assets, Chrysaor increased its pro forma 2018 production to 177,000 boepd, making it one of the largest oil and gas producers in the UK North Sea. It is also worth mentioning that Chrysaor in June 2018 bought Spirit Energy’s entire interests in the Armada, Maria and Seymour fields offshore the UK.

In addition, in February this year, the UK-based oil and gas company RockRose signed a share purchase agreement to acquire 100% of Marathon Oil U.K. (MOUK) and 100% of Marathon Oil West of Shetland Limited (MOWOS) from subsidiaries of Marathon Oil Corporation. The transaction represented a complete country exit for Marathon Oil.

Offshore Energy Today Staff

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