Conoco considering North Sea asset sale by year end

ConocoPhillips is preparing to sell its fields in the North Sea, according to a Reuters report. Citing sources in the oil and gas industry and in banking, the news agency said the operator’s decision is part of an overall effort to focus on US shale operations.

While ConocoPhillips has not launched a formal process or appointed a bank to manage a potential sale, the report said that the company’s executives have had discussions with a number of North Sea operators and bankers in the region to test the waters.

Reuters said that the sale could net as much as $2 billion, though it was not clear how much of ConocoPhillips portfolio would be available, or if the company would put its Norwegian North Sea assets up as well.

The assets, which would include what’s left of its holding in the Clair Field, are likely to draw interest from private equity-backed companies investing in the North Sea and from rival energy firms, the people said, declining to be identified as the deliberations are confidential.

ConocoPhillips plans to invite bids by the end of the year for its remaining North Sea assets, which could be valued at up to $3 billion in a sale, according to people with knowledge of the matter. ConocoPhillips has operated in the North Sea for more than 45 years, with significant developments in both the UK and Norwegian sectors of the North Sea.

These developments include fields in Greater Britannia, the J-Area, and the Southern North Sea fields in the UK, along with the Greater Ekofisk Area in Norway. Britannia is one of the largest natural gas and condensate fields in the UK North Sea.

ConocoPhillips holds a majority ownership interest in the field, having assumed operatorship in 2015. The J-Area, which the company also operates, consists of the Judy/Joanne, Jade, and Jasmine fields in the UK Central North Sea. Last year, ConocoPhillips began a development drilling campaign in the area that is expected to provide additional volumes.

“ConocoPhillips is marketing its UK assets after receiving an unsolicited offer,” a representative for Conoco said in a statement. Conocos assets are primarily gas fields, producing 276 MMcf/D of natural gas compared to 75 million BOE/D in 2017.

The company’s Norwegian assets include the Ekofisk and Eldfisk fields, which comprise several production platforms and facilities like Ekofisk South and Eldfisk, each of which achieved first oil within the past 5 years. Conoco, in July, announced a North Sea-for-Alaskan asset swap with BP Plc.

As part of that transaction, the Houston-based firm agreed to divest a 16.5% stake in the Clair Field for an undisclosed amount while retaining a 7.5% interest. In its 2017 annual report, ConocoPhillips said continued development drilling was to be expected in the Greater Ekofisk Area with additional wells coming online.

“If offers do not meet the company’s expectations for value, ConocoPhillips will retain the assets. We won’t comment on any further details about the process.” It also holds a 20% interest in the Aker-operated Alvheim field, located near the border with the UK sector, as well as a 24% interest in the Statoil-operated Heidrun field.

Altogether, its assets in the Norwegian sector produced 161 million BOE/D and 200 MMcf/D of natural gas last year. Beyond its fields, ConocoPhillips also has an ownership interest in the Norpipe pipeline, which carries crude oil from Ekofisk to a crude oil stabilization and natural gas liquids processing facility, as well as the Tesside oil and Theddlethorpe gas terminals.

The bulk of ConocoPhillips’ shale operations focused on the continued development of assets, according to its 2017 annual report. The company holds 10.4 million net acres of onshore conventional and unconventional acreage in the contiguous US, with nearly 10% of that acreage falling in the Bakken, Eagle Ford, and Permian.

The majority of its 2017 onshore production came from those three basins, with a combined net peak production of 302 million BOE/D. The prospective sale comes amid efforts by Chevron Corp. to also exit the aging North Sea basin in its pursuit of higher returns elsewhere, such as from U.S. shale or liquefied natural gas ventures.

ConocoPhillips is focusing on its U.S. shale business and is getting ready to sell some or all of its North Sea assets that could fetch US$2 billion, Reuters reported on Monday, citing banking and industry sources. ConocoPhillips, which had tried to sell some of its North Sea assets in 2014 but failed has not yet launched a sales process or appointed banks, according to Reuters’ sources.

Executives from the U.S. oil company, however, are said to have recently met and spoken with several operators in the North Sea and with bankers to “gauge the appetite for the sale”, one of the sources told Reuters. ConocoPhillips has been operating in the UK and Norwegian parts of the North Sea for more than 50 years.

The company’s operated assets in Europe include the Greater Britannia, J-Area, and Southern North Sea (SNS) fields in the United Kingdom and the Greater Ekofisk Area in Norway. ConocoPhillips also conducts exploration activity in both Norway and the United Kingdom.

In the UK, ConocoPhillips’s total production in 2017 stood at 75000 barrels of oil equivalent per day (boepd), according to the U.S. company’s annual report. ConocoPhillips also holds a 24 percent stake in the Clair Ridge project operated by UK supermajor BP.

The Clair Ridge project is targeting 640 million barrels of recoverable resources with two new bridge-linked platforms, the construction of which was completed in 2016. BP expects first oil from Clair Ridge this year, with plans to continue production until 2050 and production capacity expected to peak at 120,000 bpd.

Last month, ConocoPhillips said in an emailed statement to Routers that it would cut 450 jobs in the UK over the next two years as the company shuts down its southern North Sea production through the Theddlethorpe Gas Terminal. The job cuts will begin in October this year and take place until April 2020, ConocoPhillips said.

ConocoPhillips did not comment for the story, and CEO Ryan Lance did not mention the potential sale during his address at the company’s annual stockholder meeting held this week.

Rivals have also scaled back their presence in Norway following strategic reviews prompted by the 2014-2017 industry downturn: ExxonMobil has sold all its operated assets in the country, while BP merged its local unit with a smaller Norwegian company, and Royal Dutch Shell Plc and Total SA have divested assets.

 

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