ConocoPhillips sells UK business to Chrysaor for $2.7 billion

Oil major ConocoPhillips has entered into an agreement to sell two ConocoPhillips United Kingdom subsidiaries to Chrysaor for $2.675 billion, plus interest and customary adjustments.

Together, the subsidiaries indirectly hold the company’s exploration and production assets in the U.K., as well as associated decommissioning liabilities, ConocoPhillips said on Thursday.

ConocoPhillips added it will retain its London-based commercial trading business and its 40.25 percent interest in and operatorship of the Teesside oil terminal. Proceeds from this transaction will be used for general corporate purposes.

“We are extremely proud of the legacy we’ve built in the U.K. over the last 50 years and are pleased that Chrysaor recognizes the value of this business,” said Ryan Lance, chairman and chief executive officer.

“This disposition is part of our ongoing effort to hone our portfolio and focus our investments across future low cost of supply opportunities.”

The effective date for the transaction will be January 1, 2018. The transaction is subject to regulatory approval and other specific conditions precedent. The sale is expected to be completed in the second half of 2019.

Chrysaor now one of the largest O&G producers in UK North Sea 

Full-year 2018 production and year-end 2018 proved reserves associated with the U.K. assets being sold were approximately 72 thousand barrels of oil equivalent per day (MBOED) and approximately 99 million barrels of oil equivalent (BOE), respectively.

In a separate statement on Thursday, Chrysaor said that this acquisition increases its pro forma 2018 production to 177,000 boepd, making Chrysaor one of the largest oil and gas producers in the UK North Sea.

Including the assets acquired from ConocoPhillips, at January 1, 2019, Chrysaor’s pro forma 2P reserves total over 600 mmboe. Pro forma production in 2019 is expected to increase to over 185,000 boepd, driven by the active drilling and development programs across the company’s existing and newly acquired assets.

As a result of this acquisition, Chrysaor will add three material assets to its portfolio. These include two new operated hubs in the UK Central North Sea ‐ Britannia and J‐Block. In addition to the associated high‐quality oil and gas reserve base, these hubs have access to significant contingent resource potential providing near field opportunities for production growth and reserve replacement.

The third material acquired asset is an interest in the world class Clair Field area located in the highly prospective West of Shetlands region. This interest and the Clair Field’s prospects for future additional development complement Chrysaor’s existing West of Shetlands position in the Schiehallion Field.

In the UK Southern North Sea, Chrysaor will assume responsibility for an ongoing decommissioning program on ConocoPhillips UK’s end‐of‐life assets. This decommissioning program is very well advanced and proceeding in accordance with ConocoPhillips’ plans. Chrysaor plans to have materially completed execution of this program by 2022, and values decommissioning competency as a long‐term commercial opportunity and enabler in the UK.

Chrysaor is backed by Harbour Energy, a permanent capital energy investment company managed by EIG Global Energy Partners (EIG). Chrysaor will fund this acquisition from existing cash resources and an upsized $3 billion Reserve Based Lending debt facility underwritten by Bank of Montreal, BNP Paribas, DNB Bank, and ING Bank.

Chrysaor’s belief in potential of UK North Sea 

Phil Kirk, Chief Executive, Chrysaor, said: “This significant acquisition reflects our continuing belief that the UK North Sea has material future potential for oil and gas production. Acquiring ConocoPhillips UK accelerates our strategy and further strengthens our position as one of the leading independent exploration and production companies in Europe.

“These assets complement our existing operations and, with operating costs at less than $15 per barrel across the enlarged group, our portfolio delivers high margins and significant positive cash flow. In the Central North Sea, we will own a range of operated hub infrastructure providing access points in an area with the largest undeveloped contingent and prospective oil and gas resource base in the UK.

“In the West of Shetlands region, we have secured long life cashflows from two world‐class fields operated by BP. Chrysaor’s West of Shetlands position also provides exposure to a developing region with significant interest and momentum from major oil companies. We will seek to build on that through the acquisition of additional interests and acreage.”

Linda Z. Cook, Chairman of Chrysaor, added: “We are excited to play a role in the natural evolution of the North Sea and to enable the safe transfer of assets from major oil companies such as ConocoPhillips to new, well‐ funded, privately‐owned operators. This process results in a good deal for both the seller and the buyer, with new asset owners such as Chrysaor bringing the strategy and capital required for reinvestment and growth.

“The outcome is a reinvigorated oil and gas sector, an extension of the producing life of existing fields and the maximization of hydrocarbon resource recovery.”

ConocoPhillips-Chrysaor deal is the second major deal in less than a week. Namely, Chevron last Friday entered into a definitive agreement with Anadarko Petroleum Corporation to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at $33 billion, or $65 per share.

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