Paladin Makes Investment Plans for Older North Sea Fields

Paladin Resources is planning an ambitious investment program for some recently acquired older North Sea fields in an effort to get more output from the fields that were rejected by larger firms. Paladin's Chief Executive, Roy Franklin, said he was in talks with partner Energy North Sea about a 150 million-pound ($240 million) investment in the Montrose, Arbroath and Arkwright (Monarb) fields in the Central North Sea.

At 90 million pounds, Paladin's 60-percent share of that investment is about twice the firm's pre-tax profit for the first half of 2003, which rose 41 percent from a year ago to 44.7 million pounds ($71.60 million) thanks to higher output and higher oil and gas prices.

But Franklin said he was confident the investment would be worthwhile. "In the first quarter, before we bought these assets, they were producing about 15,000 barrels a day," he said.

"This month they produced 19,000, and last week that figure was 20,000. At the moment, well capacity is about 21,000, but one extra well could raise that to 22,500, and with the bulk of the investment to be made next year, we expect to be able to increase it significantly."

Paladin bought its 60-percent stake and operatorship of the Monarb grouping in the central North Sea from BP in May.

Energy North Sea, a company set up by former executives from Enterprise Oil, has since agreed to buy the remainder from Shell, which acquired a 40-percent Monarb stake along with its acquisition of Enterprise last year.

Franklin, who made a one-for-four share issue to pay for the Monarb acquisition in December, said he would not need to go to shareholders for any new funding for the investment.

Oil majors are selling some of their older North Sea holdings because they have become too small scale and because they are focusing their efforts on newer fields.

Monarb represents only about one percent of total British North Sea output but its progress, along with new discoveries such as Buzzard and the Ardmore field which restarts later this year after a decade of inactivity, is a sign that there is life yet in Britain's oil reserves.

Paladin renewed its commitment to reach 100,000 barrels of oil equivalent (boe) a day of production and 250 million barrels of reserves by 2008.

In the half-year it produced an average of about 38,000 boe a day, and expects annualized output to be 45,000 barrels by the end of 2003.