BP will sell portions 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.
The British oil major said that the sale includes 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.
Subject to partner, regulatory and other third party approvals, operatorship of both Magnus and SVT will transfer from BP to EnQuest on completion. The sale will not affect BP’s rights to capacity in SVT.
Option to take it all
Under the terms of the agreement, EnQuest has an option, exercisable between 1 July 2018 and 15 Jan 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 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.
BP CEO Bob Dudley said:“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. 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.”
Mark Thomas, BP North Sea Regional President said: “In recent years, we have been focusing our North Sea portfolio around core assets west of Shetland and in the central North Sea – bringing new fields into production, redeveloping and renewing existing producing facilities, acquiring new acreage and interests through licence rounds and farm-ins and selling some of our mature assets to those who see greater strategic fit with their businesses. 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.
“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’).”
EnQuest CEO Amjad Bseisu said: “This transaction capitalizes on EnQuest’s strengths in realizing value from the management of maturing oil fields, as underlined by BP’s confidence in proposing a change of operatorship to EnQuest. Magnus is a good quality reservoir; it has large volumes in place, with potential for infill drilling and for the revitalization of wells, and scope for field life extension. It is a producing asset that would materially increase EnQuest’s reserve base. We are a natural strategic partner to BP for maturing assets and this innovative structure represents a natural evolution of EnQuest’s business.”
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.
Staff included in transaction
SVT and Magnus are expected to transition to EnQuest as fully operational entities, with those staff who operate and support the assets expected to transfer with the businesses. Their contractual terms and conditions are protected under UK Transfer of Undertakings (Protection of Employment) regulations (TUPE). Around 100 BP staff are currently associated with Magnus and associated infrastructure and approximately 240 with SVT. BP will now begin consultation with in-scope staff.
Subject to the receipt of regulatory and other third party approvals, BP said it aimed to complete the sale and transfer of operatorship during 2017.