ConocoPhillips eyes North Sea exit

17 May 2018, Week 19, Issue 450

Reports that ConocoPhillips is gearing up to sell some or all of its North Sea assets will have M&A bankers salivating as they wait to see which fields could be included in any sale, who steps forward to bid for them and what kind of financing they might require. 

Reports emerged this week that ConocoPhillips officials had approached potential buyers and financiers to "gauge the appetite" for a sale that could be valued as high as US$2 billion. 

The company’s North Sea assets include a 24% stake in the Clair field in the West of Shetland part of the UK North Sea. Also potentially on the block are holdings in the Greater Britannia, J-Area and Southern North Sea (SNS) fields in the UK and the Greater Ekofisk Area in Norway. The company is also active in exploration activity in both countries. 

The BP-operated Clair Ridge project is perhaps the most attractive of ConocoPhillips’ North Sea assets. BP has described the Clair field as the biggest undeveloped oil and gas resource in the UK North Sea and said Clair Ridge was on track to enter production this year. The project is targeting 640 million barrels of recoverable resources with two new bridge-linked platforms and could continue producing until 2050, with production peaking at 120,000 bpd. 

ConocoPhillips is believed to be keen to divest non-core assets to focus on its US shale business, though any move to offload its North Sea assets is still at a very embryonic stage. There is also no guarantee that a deal would get done, with the company already having tried and failed to sell some North Sea assets in 2014. 

The rebound in oil prices since then and strong appetite for assets in the North Sea Basin mean the market conditions are very different now, however. This means the assets have a much higher price tag, which could limit would-be buyers to private equity players or larger energy companies with sufficient financial firepower. 

Acquiring assets in ageing North Sea basins would also expose buyers to high decommissioning costs in the future. 

ConocoPhillips had already signalled a weakening commitment to the UK. Early last month it announced plans to axe 450 jobs in the country over the next two years as it shuts down its SNS production via the Theddlethorpe Gas Terminal. Job cuts will start in October. 

Edited by

Ryan Stevenson

Managing Editor

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