BP to Sell Stake in UKCS Magnus Field, Sullom Voe Terminal
BP plc has agreed to sell part of its interests in the Magnus oil field and some associated pipeline infrastructure, in the UK northern North Sea, and in the Sullom Voe Terminal (SVT), on Shetland, to EnQuest.
Included in the agreement is 25 percent of BP’s 100 percent stake in Magnus, 25 percent of BP’s interests in a number of associated pipelines and a 3 percent interest in the Sullom Voe Terminal from BP Exploration Operating Company Limited’s (BPEOC) current total 12 percent stake. The sale price of $85 million is expected to be met by EnQuest from the sharing of future cash flows from the assets and the agreement will not include any upfront payment to BP.
Under the terms of the agreement, EnQuest has an option, exercisable between July 1, 2018 and January 15, 2019, to purchase BP’s remaining 75 percent interest in Magnus, a further 9 percent interest in SVT and the remainder of BP’s interests in the associated pipelines for a consideration of $300 million.
Under this option, after the recovery of consideration and adjustments, BP would also retain 50 percent of net cash flows from these assets, up to a limit of $1 billion. The consideration for this further acquisition would be met by EnQuest through a mixture of cash and future asset cash flows.
“EnQuest’s experience of investing in and extending the life of mature assets in the North Sea make them a natural operator of Magnus and Sullom Voe in this later phase of their life,” BP Group Chief Executive Bob Dudley said in a company statement.
“We believe this will enable them to prolong the life of the assets, benefiting the region and creating additional value for both EnQuest and BP shareholders. In addition to investing in and growing our core businesses, BP will continue to seek innovative opportunities such as this to work with partners to maximize value creation from our entire portfolio,” he added.
Mark Thomas, BP North Sea regional president, echoed Dudley’s views.
“Sullom Voe and Magnus have been great businesses for BP, but to maximize the economic life of these important assets, we believe this deal will offer them a better long-term future,” Thomas said.
“With their integrated skills, operational scale, cost structures and high levels of operating efficiency we have seen what EnQuest can do on the Thistle, Deveron and Don fields that were previously operated by BP. We believe this is a good example of having the right assets in the right hands, offering new opportunities for the assets and benefitting the UKCS, in the spirit of Maximizing Economic Recovery (‘MER UK’),” he added.
Industry body Oil & Gas UK was also supportive of the new deal.
"This is an innovative deal which will open a new chapter in the life of Sullom Voe and the productive life of Magnus, an iconic North Sea oil field,” Oil & Gas UK Chief Executive Deirdre Michie said in a comment sent to Rigzone.
“It also sends a very positive signal on the opportunities available in the North Sea and is an indication of confidence that, even after producing oil for more than thirty years, this mature field still has more to give,” Michie added.
"The transfer of assets and infrastructure builds on a long-term trend to see the right mature assets move into the right hands of established UK mature field operators and sees a fresh commitment to exciting development opportunities by established incumbent companies,” the Oil & Gas UK Chief Executive concluded.
Oil production from the BP-operated Clair field will continue to be exported through SVT, and the new Clair Ridge development will also export oil to the terminal when it comes on-stream. Gas produced from the Foinaven and Clair fields will also continue to be processed through SVT. Gas from the re-developed Schiehallion and Loyal fields will export to SVT when they are brought back into production in the coming months.
SVT and Magnus are expected to transition to EnQuest as fully operational entities, with staff who operate and support the assets expected to transfer with the businesses. Around 100 BP staff are currently associated with Magnus and associated infrastructure and approximately 240 with SVT. BP has stated that it will now begin consultation with in scope staff.
Subject to the receipt of regulatory and other third party approvals, BP aims to complete the sale and transfer of operatorship during 2017.
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