NORTH Sea oil and gas entrepreneur Tom Cross has seen shares in the Parkmead Group business which he runs surge after the firm announced an acquisition and said it has more deals in its sights.
Aberdeen-based Parkmead has clinched what an analyst described as a creative deal in the Netherlands, which will help it achieve a big increase in production.
The €565,000 (£480,000) deal involves Parkmead buying royalties held by Canada’s Vermilion Energy which gave it the right to a share of the output from three onshore fields operated by Parkmead.
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The revenues associated with the royalties were worth €325,000 in the year to June 30 2020.
Parkmead noted the deal will allow the firm to double its stake in the three fields.
“This innovative deal enhances our gas interests in the Netherlands and adds significant value to Parkmead,” said Mr Cross.
He added: “The Group is also benefitting from the very strong recovery in gas prices.”
The comment highlights the scale of the recovery that has been seen in the gas market in recent months.
While prices tanked in spring last year amid the fallout from the coronavirus crisis they rallied after the cold winter and the strong recovery in China boosted demand. The rally has accelerated alongside the roll out of coronavirus vaccines around the world.
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The price of natural gas is around 75 per cent higher than it was in January last year.
Industry leaders insist gas will have an important role to play in support of the global drive to cut emissions. It can be used as a less carbon-intensive alternative to coal while the required renewable energy capacity is built up.
Mr Cross has made clear that he thinks oil and gas and renewables will feature in the energy mix going forward.
Parkmead plans to develop clean energy facilities such as windfarms on land in Aberdeenshire that it bought in an £8.5 million deal completed in 2019.
The group is also working on plans to develop oil fields in the Greater Perth Area (GPA) of the Moray Firth. It has said these could contain up to around 130 million barrels oil equivalent.
In the latest North Sea licensing round the company acquired an interest in a large undeveloped heavy oil find, Fynn Beauly, that lies close to the GPA fields.
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Parkmead acquired its interests in Holland and in the GPA fields through deals completed under Mr Cross’ leadership.
Mr Cross said yesterday that Parkmead continues to build a portfolio of high-quality energy projects
through acquisitions, organic growth and active asset management.
He added: “Our team is carefully evaluating further potential gas, oil and renewable energy acquisitions that would complement our existing portfolio.”
Analyst Jonathan Wright at Parkmead’s house broker finnCap noted that Parkmead has around £25m cash, which he said provided it with meaningful firepower for larger acquisitions. Mr Wright said these would most likely be in the European gas or renewables sectors.
Regarding the royalties deal with Vermilion, he said: “While small, this creative acquisition brings financial benefits, but more importantly greater partner alignment across the licences, which should help extend the producing life of the fields.”
Parkmead now has a 15% stake in the licences concerned.
Mr Cross took charge at Parkmead after the Dana Petroleum business he developed was acquired by Korea’s KNOC for £1.9 billion in 2010.
Shares in Aim market-listed Parkmead rose seven per cent in morning trading. They closed up 4%, 2.2p, at 52.1p. The firm has a stock market capitalisation of around £60m.
The fallout from the coronavirus crisis has given fresh impetus to the shake-up in the North Sea. Some big players have sold North Sea assets in order to raise funds to invest in other areas.
READ MORE: North Sea oil firm plots 'material' acquisitions after bet on area pays off
Independents expect to be able to capitalise on the retreat of majors by acquiring assets at attractive prices. Serica Energy has said it is in the market for material deals.
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