Petrogas and Hitec Vision snap up Total UK asset package in $635m deal

French Major Total has sold its stakes in 10 UK North Sea fields to Petrogas NEO, a new joint venture between Petrogas and HitecVision, for US$635 million.

The asset package includes operated and non-operated assets, which will produce 25,000 barrels of oil equivalent per day (boe/d) this year. The assets hold over 30 million barrels of oil equivalent in remaining reserves.

Ross Cassidy, a senior research analyst on Wood Mackenzie’s North Sea team said: “The key asset in the package is the CNOOC- operated Golden Eagle field, which accounts for over half of this year’s expected production and most of the remaining value. The field is expected to produce to 2030.

Fresh investment

“Several of the fields are due to cease production by 2025 and have near-term decommissioning liability. The new operator will no doubt aim to extend the life of these fields with fresh investment.”

He added: “The rationalisation of Total’s UK portfolio was expected following its takeover of Maersk in 2017, and is part of Total’s corporate strategy to lower the production costs of its global portfolio.

“However, even with this sale, Total remains one of the UK’s top producers in 2019, with production underpinned by Elgin-Franklin, Laggan-Tormore and Culzean.”

The deal is the latest example of the Majors divesting non-core UK assets to private equity-backed companies and independents looking to expand their presence in the UK upstream sector.

Petrogas is the upstream arm of MB Holdings, a family-run Omani company specialising in drilling and oilfield services, mining and marine engineering, alongside exploration and production of oil and gas.

It currently produces 35,000 boe/d from onshore Oman and offshore Netherlands, Liam Yates, from Wood Mackenzie’s Middle East upstream team, said.

Transformational deal

Mr Yates added: “The company entered the North Sea and became an offshore operator through its acquisition of Chevron’s Dutch portfolio in 2014. Since, it has contributed to reserves growth in a portfolio of mid-late life assets using its strong exploration background.

“This deal transforms its production profile, remaining reserves and value. It has a strategy of expanding overseas and the North Sea is becoming a core area of focus.

“Petrogas specialises in mature, producing assets where it can leverage its subsurface expertise to increase production. It also operates in Egypt, Denmark, and Germany.

 HitecVision is a private-equity company based in Stavanger, Norway.  It already has a presence in the UK upstream sector through its stake in Verus Petroleum and is active in Norway via its investment with Eni in Var Energi. This deal is its latest investment in the UK upstream sector via its NEO investment fund.

Mr Cassidy said: “The combination of Petrogas and HitecVision in the UK is a promising sign for investment in the UK upstream sector. The new Petrogas NEO joint venture aims to grow its UK production to more than 100,000 boe/d over the next two to three years.”