Serica Energy has agreed with BP to delay the completion of acquisition of BP’s interest in the Bruce, Keith, and Rhum (BKR) fields in the UK North Sea to enable the completion of regulatory processes.
Serica said on Friday it had agreed with BP to extend the completion timetable for the BKR transaction for one month until early November 2018.
This extension is to enable outstanding regulatory and partner consent processes to be completed, including processes by the US Office of Foreign Assets Control (OFAC) relating to the Rhum field, Serica explained.
These consents are part of the conditions for completion as set out when the BKR transaction was announced back in November 2017.
“Serica and BP are working closely together and are committed to achieving this new timetable. The terms of both the BP transaction and the related transaction with Total remain unchanged,” Serica said.
To remind, Serica is also buying Total’s Bruce and Keith field interests through a deal announced last August. Under this deal, Serica will take over a 42.25% interest in the Bruce field and a 25% interest in the Keith field and associated infrastructure from Total.
It is worth noting that the Total transaction is subject to completion of the BP transaction.
In particular, Serica continues to be entitled to a share of net cash flows from the BKR Assets relating to the BP and Total interests during the period from the effective date of the BP and Total acquisitions (January 1, 2018) to the date of completion. This will continue to be the case under the extended timeline, with gas prices achieving record levels during the effective period since the start of the year.
Serica ready for operator role
Serica noted that all other transition requirements, including transfer of offshore and onshore staff, readiness of operating, safety and environmental procedures and transfer of all contractual obligations, are ready to complete once all outstanding consents have been received.
Serica added it will be ready to assume operatorship of the BKR Assets once the outstanding conditions have been met.
Mitch Flegg, Chief Executive of Serica Energy, commented: “We have taken the decision to extend the completion period on BKR as a practical measure that provides additional time for the approvals process to complete. We are working closely with the various authorities and with field partners to satisfy all remaining conditions and we appreciate the commitment that the relevant parties are making as we near completion of this complex transaction. Serica is well prepared to assume operatorship of the assets. Together with BP, we remain fully committed to completing the BKR deal.
“Completion of these important transactions will enable Serica to assume operatorship and optimize the full performance of these valuable UK offshore assets, extend producing life where possible and ensure maximum recovery of remaining reserves. Coming at a time of strong gas prices and significantly improved oil prices the company is set to benefit from the resultant strong cash flows which have occurred since the start of the year, as well as from resumed production at Erskine which is expected to occur later this month as planned.”
The Rhum conundrum
It is worth reminding that the Rhum field has attracted attention recently as Iran’s NIOC owns a share in it, making a field potentially “vulnerable” to the new sanctions regime against Iran announced by the U.S. government on May 8. BP and NIOC have a 50% interest in the field each.
The decision by the U.S. government to reinstate the sanctions against Iran resulted in a change of U.S. policy in respect of the granting of OFAC licenses.
Certain services in support of Rhum field operations are currently provided under authorizations obtained from the U.S. OFAC. The current OFAC license issued to BP enabling the provision of goods, services and support by certain U.S. persons, expires on September 30, 2018. Applications have been submitted to OFAC by BP and Serica for a renewed license beyond that date.
Serica said in August that, together with BP, it was in discussions with both UK and US governments to provide the basis on which the necessary license consents can be obtained and thereby enable continuing operations on the Rhum field after expiry of the existing OFAC license.
Offshore Energy Today Staff