A prominent North Sea-focused oil and gas firm has said it is on the hunt for acquisitions in the area amid the fallout from the crude price plunge and highlighted the potential of big prospects on its acreage.
While the North Sea oil and gas industry is facing the threat of a deep downturn, Cluff Natural Resources reckons the upheaval in prospect will create openings for firms that have strong balance sheets.
North Sea spending to fall by £10bn a year following oil price plunge
“The current situation provides a window of opportunity that the Company will look to capitalise on,” said the firm.
It made the comment on a day the outlook for prices worsened. Hopes that major oil exporters would extend the record production curbs they agreed in April to support the market faded amid reports of disagreements between some countries.
However, the approach Cluff Natural Resources plans to take may fuel hopes that independents could help limit the impact of the fall in prices this year on activity in the North Sea.
Some relatively small firms played a big part in helping the North Sea industry to stage a recovery from the downturn triggered by the sharp fall in oil prices from 2014 to early 2016. This came after they bought assets that bigger fish decided to offload to free up funds to invest in other areas.
Independents focus on North Sea prospects as majors retreat
Cluff Natural Resources said the opportunities it expects to be created by the current price environment include the disposal by larger operators of producing assets or entire portfolios.
It said: “The Company proposes to actively identify opportunities, including stakes in producing assets across the North Sea which have the potential to deliver significant free cash flow, and potentially contribute to drilling costs, as commodity prices recover.”
The company reckons cuts in the prices of exploration services could help reduce the financial risks associated with drilling. Services firms cut prices during the last downturn.
Industry leaders have warned that exploration activity levels could hit a fresh low following the latest oil and gas market turmoil.
However, Cluff Natural Resources and Royal Dutch Shell remain fully committed to drilling the Pensacola and Selene prospects in the Southern North Sea.
North Sea exploration deal coup for oil and gas pioneer
Cluff Natural Resources turned heads last year when it persuaded Shell to buy in to the licences containing the prospects and to fund work on them.
Drilling on the 50 million barrel oil equivalent Pensacola prospect is expected to start next year.
The timetable for the start of drilling on Selene has slipped to 2022 “in light of the current investment environment”.
Cluff Natural Resources said it is still engaged with some established operators in relation to the potential sale of stakes in the Dewar oil prospect off Scotland.
“The Board believes that there will be significant interest in this asset when the oil price improves,” said the company.
Shareholders approved a proposal to change the company’s name to Deltic Energy at its general meeting yesterday.
The company was started in 2012 by a pioneer of North Sea exploration, Algy Cluff
A former Grenadier Guards officer, Mr Cluff founded the firm that discovered the Buchan field in the North Sea in 1975. He stepped down from the chief executive’s role at Cluff Natural Resources in February 2018 and was succeeded by Glasgow university graduate Graham Swindells.
Oil industry veteran Algy Cluff returns to his roots with new miltary charity
Brent crude sold for $39.73 per barrel yesterday afternoon, down $0.06/bbl on the day.
The price rose above $40 briefly on Wednesday, for the first time since March. The price has increased from the 18-year-low of $15.98/bbl it reached in April following the record production cuts agreed by the Opec+ grouping and the easing of lockdown measures in some countries.
The scale of the cuts is due to reduce from June 30. It had been hoped Opec+ members would decide yesterday to leave the cuts unchanged for some months.
Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB, said: “There is a better than even chance for Opec+ rolling production cuts beyond June 2020, but a final decision will probably not be available before mid-June as the group struggles with how to whip cheaters into line.”
Brent crude sold for around $70/bbl in January.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here