North Sea oil and gas firm in growth mode after exploration coup

The chief executive of North Sea-focused Deltic Energy, Graham Swindells, has underlined the firm’s appetite for North Sea acquisitions as he declared the area could recover from the turmoil triggered by the coronavirus.

The plunge in oil and gas prices since March has left the North Sea facing the prospect of a long and deep downturn. A range of firms have announced plans to cut spending and jobs in the area.

However, Mr Swindells said London-listed Deltic is looking at a range of acquisition opportunities including oil assets off Scotland.

 “We certainly see an opportunity in the current market,” he said, noting the firm has cash in the bank. This has put it in a strong position at a time when many sector players are struggling.

After focusing on exploration, Deltic would be interested in buying into production assets, which generate cash that it could use to fund its work, or “near term drilling opportunities”.

Assets may become available at knock down prices as firms look to save cash.

But Mr Swindells reckons the longer-term outlook is brighter than prices suggest.

The Ayrshireman noted that people recognise gas is going to be a key part of the mix for decades to come. It can help reduce reliance on more carbon-intensive energy sources such as coal while the required renewable energy generation capacity is developed.

“I don’t think demand for oil on a global basis is going to disappear any time soon.”

Experience gained during the deep downturn triggered by the slump in oil prices from 2014 to 2016 has left Mr Swindells confident the North Sea can recover.

“The North Sea has been written off or the end of the North Sea has been called many times before but the industry has always managed to adapt and innovate.

“I certainly believe that through innovation, technology and collaboration our company and the industry as a whole, certainly as the North Sea is concerned, will continue for many decades to come, subject to getting through these difficult times.”

 Mr Swindells thinks Deltic, which changed its name from Cluff Natural Resources recently, has made good progress in recent years against a challenging backdrop.

Founded by a pioneer of North Sea exploration, Algy Cluff, the company expanded in the area during the last downturn although others were turning their backs on it.

The Aim market-listed firm took on licences covering acreage it reckoned had potential which had been overlooked by others.

The company achieved a significant coup last year when the mighty Shell bought into some of its territory and agreed to fund work on two prospects.

“These are licences that were held by previous operators in the past but through looking at them in a different way and applying the latest technology to reprocessing we’ve been able to identify additional opportunities to the point that what did not seem viable 20 years ago now appears very much viable.”

Shell has agreed to drill wells on the Pensacola and Selene prospects in a development that highlights the impact relatively small players can have in terms of stimulating badly-needed interest in exploration.

Mr Swindells noted: “This is going to be the first true exploration drilling that Shell has done in the Southern North Sea for many years so we’re very excited and proud to have played a small part.”

Deltic has been in regular contact with Shell in recent months. The giant is still committed to drilling on the acreage it bought in to, with a well on Pensacola expected next year and one on Selene set to follow in 2022.

 In Mr Swindells’ opinion success on one of these wells could be “truly transformational for the company from a value perspective”.

The company has other acreage including a licence containing the Dewar oil prospect in the Central North Sea. Directors are confident it will be able to get firms to buy into this.

Deltic bid for more licences in the latest UK round.

The firm has a market capitalisation of just £11 million but Mr Swindells believes it could become one of the leading North Sea players among those with a focus on exploration and appraisal work.

“I’ve always had faith in the company’s strategy and the technical ream led by Andrew Nunn and what we do around identifying overlooked or less well-developed plays.”

The University of Glasgow accounting graduate sounds like he is finding work at Deltic fulfilling amid the operational challenges posed by lockdown.

A member of the Royal Troon club, Mr Swindells is glad that he has been able to play golf game again at his local course in Woking following the easing of some lockdown measures.

He had big shoes to fill in 2018 when he succeeded Mr Cluff as chief executive of the company. Mr Cluff played a part in the discovery of the huge Buchan field in the North Sea in 1975 then went into mining in Africa before founding Cluff Natural Resources.

“Algy is a very inspirational and unique character, he was one of the first people into the North Sea … a true entrepreneur at heart. I certainly learned a lot from him.”

Cluff Natural Resources refocused on the conventional North Sea exploration business in 2015 after running into opposition to a plan to produce gas by burning coal beneath the Forth.

Mr Swindells insists this was worth looking at.

While Mr Cluff left the firm last year they remain friends. Mr Cluff stood down as chairman in July last year but retains a small shareholding in the firm.

Mr Swindells joined Cluff Natural Resources in 2013 as chief financial officer after working as an advisor with companies such as Arbuthnot Securities. Moving to what was a small firm was a relatively risky move but Mr Swindells wanted to play part in shaping a business rather than advising others how to.

The father of two admits there have been tough times.

“There were moments. When you’re at $27 oil and you’re running out of cash …”

However, the company has made enough progress to leave Mr Swindells confident that he is on course to justify the faith Mr Cluff showed in his ability to take the company forward.

“I’d like to think we’ve gone some way towards doing that particularly with bringing Shell in.”

Q&A

What countries have you most enjoyed travelling to, for business or leisure, and why?

For business it would be China and South Korea which allowed me to experience a completely different business and social culture. 3 days after joining PWC in Glasgow I was sent off to South Korea on a big restructuring job. I was in my mid twenties and having barely been out of the West Coast of Scotland it was a massive eye-opener and an incredible experience working in an international team and immersing myself in local culture with Korean colleagues.

For leisure, I love the US, my favourite being a road trip round California and Nevada with my wife.

When you were a child, what was your ideal job? Why did it appeal? I always wanted to work in business and also experience the stock market as it seemed like an exciting and dynamic environment. Throughout my career I’ve advised or worked for companies listed on the Stock Market.

What was your biggest break in business? Being offered the opportunity to move into the oil and gas industry initially as finance director at our company in 2013 after working in corporate finance in the City of London.

What was your worst moment in business? The 2008 financial crisis.

Who do you most admire and why?

Jack Nicklaus. He remains the most successful golfer of all time – he was the fiercest of competitors is a true sportsman and gentleman at the same time

What book are you reading and what music are you listening to? What was the last film you saw?

Book – Ben Hogan’s Modern Fundamentals of Golf

Music – George Ezra

Film – Jurassic Park (with my six-year-old twin boys!)

Source: The Herald

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