Page 7 - EurOil Week 04 2021

EurOil COMMENTARY EurOil

Exxon closes in on

UK North Sea sale

ExxonMobil has found a private equity-backed player to take on its UK North Sea business

US EXXONMOBIL is closing in on the sale of its Hopes of a rebound driven by fractured
UK North Sea business almost a year and a half basement reservoirs were dashed last year, after
WHAT: after starting the search for a buyer. Hurricane Energy’s disappointing experience at
ExxonMobil is in exclusive The US oil major is following on the heels of the Lancaster field west of Shetland. Some oper-
talks to sell its UK North domestic rivals Chevron and ConocoPhillips, ators such as BP are developing other deepwater
Sea assets to Neo Energy, which have already scaled down their North Sea projects in the west of Shetland area, but Exxon-
backed by Norwegian presence considerably. It sold off its Norwegian Mobil has not ventured into this more prolific
private equity firm upstream operations in late 2019 to Var Energi, a region.
HitecVision. joint venture between Italy’s Eni and Norwegian The UK sale is part of ExxonMobil’s planned
private equity player HitecVision, raising $4.5bn. exit from the European upstream sector alto-
WHY: HitecVision is now looking to snap up Exx- gether. The firm wants instead to focus on
The US major is onMobil’s UK assets as well through its Neo high-margin plays in the US and in other
withdrawing from the Energy investment vehicle. Neo and ExxonMo- emerging and frontier zones. It has been seek-
European upstream bil have entered exclusive talks and aim to sign a ing the sale of its 50% interest in the 84-bcm
sector to focus on higher- sales agreement in the current quarter, and close Neptun Deep gas block off Romania for several
margin plays elsewhere. the deal later in the year. years, and is also understood to be considering
a divestment from the giant Azeri-Chirag-Gu-
WHAT NEXT: European withdrawal nashli (ACG) project off Azerbaijan.
A deal may close in the ExxonMobil has shares in almost 40 producing
current quarter. North oil and gas fields on the UK Continental Shelf Enter Neo
Sea M&A activity shows (UKCS), many of which are operated by Royal The acquisition will boost Neo’s size consider-
signs of picking up now Dutch Shell. The fields netted the US firm some ably. The company, formed through HitecVi-
that the market outlook is 23,000 barrels per day (bpd) of oil and 202mn sion’s merger of UK North Sea units Neo E&P
more predictable than it cubic feet per day (2.1bn cubic metres per year) and Verus Petroleum in 2019, produced only
was nine months ago. of natural gas in 2019, according to company 26,500 barrels of oil equivalent per day (boepd)
records. last year.
ExxonMobil launched the sales process for its Neo gained an extra 23,000 boepd of sup-
North Sea business in August 2019, initially tar- ply through the takeover of Total’s UK North
geting $2bn in proceeds, according to Reuters. Sea fields in August last year. The Total portfo-
It put the divestment on hold after the March oil lio includes shares in the Dumbarton, Balloch,
price crash but quickly resumed it in June. Reu- Lochranza, Drumtochty, Flyndre, Affleck and
ters reported at that time that market conditions Cawdor fields. It also gained non-operated inter-
meant the company was likely to secure only ests at Golden Eagle, Scott and Telford, run by
$1.0-1.5bn for the assets. Chinese group CNOOC.
ExxonMobil was a pioneer in the early devel- Neo’s aspiration is to produce 100,000 boepd
opment of the UK North Sea, entering the region by 2022. HitecVision is also building up its foot-
in 1964. But many of its fields are now mature, print in Norway, with one of its other units Sval
with production in decline and growing ever Energi clinching a deal earlier this month to buy
costlier. One of its largest assets is a 44.5% posi- the Norwegian business of Italy’s Eni.
tion at the Shearwater field, which operator Shell North Sea merger and acquisition (M&A)
is redeveloping as a gas infrastructure hub. activity was limited in 2020 owing to the effects
UK North Sea production had enjoyed sev- of the pandemic, but the market is now showing
eral years of rising production before the coro- signs of picking up. Energy supplier SEE agreed
navirus (COVID-19) crisis began, on the back last month on the sale of its non-operated shares
of record investment levels prior to the 2014 in 15 producing UK deposits to Viaro Energy
oil price collapse. But spending cuts since that for GBP120mn ($164mn). Operators are likely
previous downturn began have put this revival to agree sales terms with more confidence now
on borrowed time, with North Sea output set to that the market, while still volatile, is more pre-
shrink over the next decade. dictable than it was nine months ago. ™

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