Appeal of North Sea underlined by UK’s biggest oil independent

North Sea-focused Harbour Energy has underlined how much money it expects to make even if oil prices remain under pressure following completion of a deal that made it the biggest independent in the area.

Harbour was created through the merger of private equity-backed Chrysaor with North Sea stalwart Premier Oil.

Trading in shares in the enlarged group started on the London Stock Exchange yesterday. The shares closed at 20.64p leaving the group with a market capitalisation of around £3.8 billion.

Harbour Energy is led by former Royal Dutch Shell director Linda Cook, who said completion of the merger was a landmark development.

She noted: “As the largest UK listed independent oil and gas company, Harbour offers a unique opportunity for investors, bringing together two complementary portfolios with a material North Sea foundation, an attractive global footprint and a strong balance sheet.”

Harbour owns interests in a wide range of North Sea fields that were amassed by Chrysaor and Premier and employs around 1,500 people in Scotland. It also has assets in Asia and the Americas that Premier acquired.

Premier agreed a merger deal with Chrysaor in October last year after facing big challenges amid the fallout from the coronavirus crisis. This sent oil and gas prices plunging.

Premier was left with huge debts after expanding rapidly in the North Sea during the last downturn.

However, Harbour Energy said the North Sea remains an attractive proposition for firms that have the right kind of assets.

It told investors it has “a cash-generative diversified UK business with a significant operated position and competitive operating costs, providing resilience to commodity price volatility”.

The firm expects to produce an average of around 200,000 barrels of oil equivalent (boe) daily this year at an average cost of less than $15/boe.

Harbour’s North Sea assets include stakes in big fields that Chysaor acquired through the purchase of portfolios from Shell and US giant ConocoPhillips, in deals worth $3bn and $2.7bn respectively.

Giants retrenched in the North Sea during the slump triggered by the sharp fall in oil prices from 2014 to 2016. This came after growth in global supplies ran ahead of demand.

Chrysaor won backing from US private equity investors that decided the downturn created opportunities to buy assets at attractive prices.

The shake-up in the North Sea has been given fresh impetus by the downturn caused by the coronavirus crisis.

US major ExxonMobil sold the bulk of its North Sea business to private equity-backed NEO Energy in February a deal worth around $1bn.

Last year Premier secured a big reduction in the cash payable for a package of assets it had agreed to buy from BP, to $210m from $625m. The deal was shelved after the merger with Chrysaor was agreed.

Harbour Energy is likely to use acquisitions to help maintain UK production at current levels. It is thought the group is unlikely to do more North Sea deals on the scale of those completed by Chrysaor.

Separately an Israeli-owned North Sea business, Ithaca Energy, has said it generated around $880m cash from operations last year despite the challenges firms faced.

Ithaca produced 66,000 barrels oil equivalent daily at an average cost of $16/boe. It is owned by Delek which last week described the business as a growth engine.

The Brent crude price fell to a 20-year-low of less than $20/bbl in April last year. The price rallied from November as coronavirus vaccines were rolled out. After rising above $70/bbl for the first time in more than a year last month, it has lost ground amid concern about rising infection rates in some countries. Brent crude sold for $63.67/bbl yesterday afternoon.

Source: heraldscotland.com

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