THE upheaval in the UK North Sea is set to continue after American giant Marathon agreed to sell its portfolio of assets in the area to RockRose Energy for around $140 million (£107m) to focus on the US.
RockRose boss Andrew Austin said the acquisition represented a key advance in the London-based firm’s campaign to build a substantial North Sea business with more deals on the agenda.
Read more: North Sea oil firm poised to continue acquisition spree
The disposal provides the latest sign that enthusiasm for the North Sea is waning among some US firms, which see brighter prospects in the shale fields of states such as Texas and North Dakota.
US giants ConocoPhillips and Chevron have put big North Sea portfolios up for sale.
“(The) announcement to divest our U.K. business represents our continued commitment to portfolio management and further concentrates our portfolio on high margin, high return U.S. resource plays,” said Marathon Oil chief executive Lee Tillman.
However, the deal also underlines the fact some investors believe the fallout from the crude price plunge has created opportunities to generate good returns in the North Sea.
Read more: Tom Cross eyes more North Sea deals as sellers get 'more realistic' amid downturn
RockRose has completed a series of North Sea acquisitions after winning backing for a growth drive focused on the area. A range of assets have been put up for sale in recent years at what some sector watchers have described as attractive prices.
The deal with Marathon will allow RockRose to acquire proved reserves for around $7 per barrel oil equivalent. The 21 million barrels reserves are held in the Foinaven field West of Shetland and the Brae assets east of Aberdeen.
While Brent crude has fallen from a four year high of $85 per barrel in October to around $65.60, RockRose would expect to make good profits on production. The acquisition will also allow the company to achieve a step change by giving it the operating capacity to develop and run North Sea assets rather than simply investing in other firms’ fields.
Read more: North Sea oil and gas industry to generate £10bn surplus
Around 250 skilled workers are expected to transfer to RockRose following completion of the deal, with no job losses envisaged
Asked why RockRose was buying in to two mature fields amid a period of renewed crude price volatility, Mr Austin said: “We believe there is still life in the assets and we’re in growth mode as a business. We wanted to have the operating capability to look at other developments.”
The expanded RockRose team will have the capability to develop, operate and safely decommission North Sea assets said Mr Austin.
He confirmed RockRose is in the market for more North Sea deals and constantly reviews opportunities, without giving details.
Mr Austin reckons the strategy followed by RockRose will support the official drive to Maximise the Economic Recovery of the North Sea’s resources while helping maintain the skills base in the UK.
Industry leaders welcomed the deal. “This news is a further signal of confidence in the industry – new entrants bring fresh ambition for investment, reinvigorating activity in existing fields and pursuing new opportunities,” said Mike Tholen, upstream policy director at Oil & Gas UK.
Read more: Exploration back on agenda in North Sea with all eyes on West of Shetland
Romana Adamcikova, senior research analyst at Wood Mackenzie, noted the Marathon deal will propel Rockrose into the top 25 producers in the region. It will increase RockRose’s production by around 13,000 barrels oil equivalent per day, to around 24,000 boepd.
"RockRose taking operatorship of the Brae complex fields is the latest example of ageing UK assets being taken on by a new player, opening up the potential of fresh investment," said Ms Adamcikova.
RockRose will assume the decommissioning liabilities for the assets.
Brae has been in production since 1983. The BP-operated Foinaven field came onstream in 1997.
Shares in London-listed RockRose were suspended temporarily at the company’s request as the deal with Marathon represents a reverse takeover.
Chemicals giant Ineos and private equity-backed Chrysaor and Neptune Energy have shown appetite for more North Sea deals after buying assets in the area in recent years.
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