Minnows make waves in the North Sea with creative negotiations

In the British North Sea, it is about going out with the old one and entering with the new one.

A carousel of mergers and acquisitions has seen a group of new North Sea players give way to groups of well-established energy groups, once again last week, when Chrysaor signed a contract of 2 , $ 7 billion for the badets of leading US oil company ConocoPhillips.

Much of the attention has focused on the private capital invested in this change. Chrysaor, for example, is supported by GIE partners. But a group of small publicly traded companies are also making waves in the mature pool.

Relatively unknown, publicly traded minions such as RockRose Energy and Serica Energy do not have the same pockets as newcomers backed by private equity. But they have distinguished themselves by entering into creative, often complex, arrangements to take back unloved badets from majors and other groups who want to reduce their exposure or leave the North Sea altogether.

These agreements could involve the conclusion of a profit-sharing agreement with current owners for future production, the acceptance to make decommissioning commitments in exchange for cash or money. offers a participation in exchange for interests in fields.

The cold waters of the North Sea are far from the beaches of the Caribbean, but Andrew Austin, founder of RockRose, was attracted by the British oil and gas basin.

In 2015, Austin, former CEO and co-founder of UK onshore energy company IGas, returned to Britain after a break in the Caribbean to buy North Sea badets.

"Many people calling with packages of badets in the North Sea were no longer in the hands of people who really wanted it," Mr. Austin said.

In February, RockRose signed an agreement on the two subsidiaries of the big American company Marathon Oil in the North Sea, which will double the output of the British company this year to 24,000 barrels of oil equivalent per day. The purchase price was $ 140 million, although the subsidiaries have $ 350 million in cash, which means that Marathon Oil is actually paying RockRose, which will also badume the badet retirement liabilities. .

This acquisition, by which RockRose will become for the first time a field operator, is the eighth that the company has negotiated in the basin in just four years, although one – along with the former Danish company Maersk Oil – is did not succeed. Last month, he approached Independent Oil & Gas, a company listed on the London Stock Exchange. His openings were rejected, but this approach was proof of a new appetite.

"Our next move. . . will look at more development badets, "Austin said.

Serica Energy, which started in 2004 as an exploration well drilling, changed its strategy in 2015 and began acquiring North Sea badets that were already in production at major companies. In that year, it entered into an agreement with BP for an 18% equity interest in Erskine, which prevented it from raising capital by selling a 5% stake in BP.

Last November, Serica finalized a transaction involving four complex transactions with BP, Total, BHP Billiton and Marubeni, the Japanese trading and investment conglomerate. These transactions gave him interest in the badets of Bruce, Keith and Rhum and involve a profit-sharing agreement with BP, BHP and Total. Its production has increased from 2,000 barrels per day to 30,000 barrels of oil equivalent per day by the end of 2017.

Small independent oil and gas companies have a long history in the North Sea, and Serica and RockRose are not the only ones involved in the latest round of mergers and acquisitions. EnQuest recently acquired BP's Magnus Oil.

But RockRose and Serica argue that their case is different because they follow an unconventional path.

RockRose was doing business "on the reverse," Austin said, first securing production rather than drilling wells, evaluating a discovery and then trying to develop it.

Tony Craven Walker, executive chairman of Serica and a veteran of the North Sea, reproduces with Serica a model he had already tested with Monument Oil & Gas, a leading independent UK, sold in 1999.

"We have started [with Monument] buying the production of Petrofina, BP and a few other people. After production, we expanded it to a larger portfolio of exploration, development, evaluation, and all kinds of things that we could finance through production, "he said. -he declares.

Mr. Craven Walker spoke about the merger in 2016 between the Norwegian independent Det norske oljeselskap and the Norwegian unit of BP to form Aker-BP, which would be the type of agreement that Serica would like to make to secure more development badets. and evaluation. "We have to merge with a portfolio," he said.

Mitch Flegg, CEO of Serica, said he has not seen companies like his own compete with players like Chrysaor, but rather operate in a "different niche" by taking badets where there are problems to be solved – with property structures for example.

"We are ready to accept the real problems that need to be solved," said Mr Flegg.