Canadian player wraps up acquisition of additional stake in gas field off Ireland

Canadian oil and gas producer Vermilion Energy has closed the acquisition of Equinor Energy Ireland Limited (EEIL) from Equinor, increasing its operated interest in a natural gas field located offshore Ireland.

Back in November 2021, Vermilion reached an agreement with Norway’s Equinor to buy its interest in the Corrib gas field for a consideration of $434 million with an effective date set at 1 January 2022. The net purchase price after adjusting for the interim free cash flow between the effective date and closing date, inclusive of Vermilion’s estimates of European windfall taxes based on information released to date on how it will be implemented in Ireland, the contingent payment and other closing adjustments are approximately $200 million.

The acquisition was closed on 31 March 2023, adding an incremental 36.5 per cent interest in the Corrib natural gas project and increasing Vermilion’s operated interest to 56.5 per cent. According to Vermilion, this acquisition makes it the largest provider of domestic natural gas in Ireland. In addition, it adds approximately 7,000 boe/d of premium-priced, high netback, low-emission European natural gas production, further strengthening the Canadian firm’s international portfolio.

Furthermore, Vermilion claims that its international assets target conventional reservoirs, which “typically have lower decline rates and better capital efficiencies compared to many North American basins.” The firm points out that the combination of high netbacks, low decline rates and strong capital efficiencies drive outsized free cash flow, which supports the company’s capital markets model of increasing the return of capital to shareholders as debt levels decrease.

The Corrib gas field is located approximately 83 km off the northwest coast of Ireland. The production from the field started in 2015 and the gas is transported to the Bellanaboy Bridge gas plant through 90 km of pipeline where it is then processed before being delivered to the national grid.

The facility has a gross plant capacity of approximately 350 million cubic feet of natural gas per day and is currently producing 115 million cubic feet of natural gas per day, representing approximately 20 per cent of Ireland’s natural gas consumption and 100 per cent of Ireland’s domestic gas production.

As a reminder, Vermilion and Canada Pension Plan Investment Board announced a strategic partnership in July 2017 whereby Vermilion would assume operatorship of the Corrib natural gas project from Shell E&P Ireland along with an incremental 1.5 per cent working interest in the Corrib natural gas project. The transaction closed in 4Q 2018.

Come August 2022, Vermilion and Irish Nephin Energy, backed by the Canada Pension Plan Investment Board, disclosed they were looking into the feasibility of a renewable energy hub at the existing Corrib gas field. As explained at the time, the two players were exploring these options as they believed Corrib could contribute to Ireland’s energy transition and the achievement of the country’s climate action targets.