Ithaca Energy acquires North Sea oil and gas fields

OIL and gas company Ithaca Energy is to acquire ten of Chevron’s UK North Sea producing fields for US$2bn. The acquisition will make Ithaca the second largest oil and gas producer in the region.

The fields will enlarge Ithaca’s existing portfolio to 18 producing field interests, and the company’s 2019 production is expected to increase to about 80,000 bbl/d of oil equivalent (60% oil and 40% gas). In Q1 2018, Ithaca’s average production was about 18,000 bbl/d of oil equivalent.

As part of the transaction, around 500 employees will transfer to Ithaca. About 200 of the employees work offshore on operated assets.

The transaction is effective from 1 January and is expected to be complete by about Q3. The payable price upon completion is expected to be in the region of US$1.65bn, “subject to adjustments for the transfer of working capital”.

Greg Aitken, Director at consultancy group Wood Mackenzie, said that his company recently identified the UK as peripheral to Chevron due to its “lack of scale and growth potential”. Whilst Chevron will keep its 19.4% stake in the Clair field of the North Sea, Aitken said that a complete exit from the UK by the company is “looking increasingly likely”.

According to the Financial Times, this move is the latest pullback from the North Sea Basin by a US energy company.

Kevin Swann, Research Analyst at Wood Mackenzie, said: “The deal continues the UK trend of smaller companies taking on assets from the majors. Following hot on the heels of Chrysaor’s deal with ConocoPhillips, we've seen assets worth almost US$5bn change hands in the last few months.”

Les Thomas, CEO of Ithaca, said: “The acquisition of CNSL is a significant step forward in the long-term development of Ithaca Energy and underlines our belief in the North Sea, particularly in the UK Central North Sea, where the enlarged business will own a range of interests in a number of key producing assets.

Ithaca is to acquire fields which Chevron owns through its subsidiary Chevron North Sea Limited (CNSL). It will acquire Alba (23.37%), Alder (73.68%), Britannia (32.38%), Brodgar (6.25%), Callanish (16.5%), Captain (85%), Elgin/Franklin (3.9%), Enochdhu (50%), Erskine (50%), and Jade (19.93%). CNSL operates Alba, Alder, Captain, and Erskine.