Independent oil and gas explorer Endeavour International is to consider selling its North Sea business as part of a strategic review.
The US firm said delays and the high cost of operating in the North Sea were holding it back in the region.
It also said the firm “continued to be disappointed” by the gap between the value it sees in its assets and how the stock market valued the business.
Yesterday’s announcement came on top of a further statement in which Endeavour said it had suspended drilling on its central North Sea East Rochelle well, part of the Rochelle development, after it was damaged in a storm.
Shares in Endeavour yesterday fell 27% on the New York Stock Exchange following the announcements.
Endeavour’s strategic review follows Valiant Petroleum launching a similar exercise last September as stock markets continue to punish small and mid-cap firms in the basin.
Ally Rule, transaction adviser at Ernst & Young, said: “On the whole, capital markets are difficult for anyone right now. The oil and gas industry is booming, but the capital markets don’t really recognise that.
“This traditionally leaves bank debt as the next option, but at the moment getting new money from banks is challenging.”
Industry body Oil & Gas UK said finance and access to infrastructure, which have delayed North Sea projects, were both the subject of industry/government body Pilot work groups. Some firms have been looking for alternative sources of funding. Trapoil agreed a £12.7million three-year loan with an affiliate of GE Energy Financial Services and EnQuest recently raised £145million through a retail bond issue.
Derek Henderson, a partner at Deloitte in Aberdeen, said: “It is important though not to see all transactions or fundraising efforts as negative or arising for the same reasons. Innovative types of financial structuring through alliances, non-bank funders, bond markets or through mergers and acquisitions bear testament to changes in the market and the ability of different groups of investors to see value in the sector.”
Endeavour said it was looking at a full range of options to “unlock its underlying value”, including a sale of the entire business or just its North Sea business, a merger, joint venture or sale of other specific assets.
The firm owns stakes in a number of oil and gas fields and development projects in the North Sea, including 30% in Apache’s Bacchus development and 44% in its operated Rochelle project, as well as stakes in the Alba, MacCulloch and Nicol fields. It also has onshore assets in America, including shale gas.
Its chief executive Bill Transier said the board “continues to be disappointed by the dislocation between the underlying asset values and our stock price.
“We have built a world-class portfolio of assets in the North Sea,” he said. “However, delays and the high-cost environment of the North Sea continue to impact our ability to execute effectively on our strategic plan.”
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