Valiant Petroleum said it might prioritise investment opportunities differently as the fall-out from the chancellor’s tax hit on North Sea oil and gas production continued unabated yesterday.
Despite that, two other oil firms delivered some positive news for the UK offshore sector. Canadian company Ithaca Energy said it was buying North Sea assets for £46million and Premier Oil said it would still invest in the area wherever there were good opportunities.
Valiant, which scrapped plans last week for a near-£100million project in UK waters, saying it was no longer viable because of the tax change, said the UK Government’s decision would “not immediately impact” on its cash flow or ability to borrow.
The UK firm added its capacity to invest was, therefore, also unaffected. However, looking to future prospects after profits soared to £31.9million in 2010 from £6.5million the year before, it added: “Valiant may prioritise its investment opportunities differently, having assessed the impact of the taxation changes on the project portfolio.”
Last Tuesday, Valiant chief executive Peter Buchanan said the firm had walked away from a 5million-barrel North Sea prospect needing £62-£93million of investment to develop.
Mr Buchanan, also chairman of the Association of British Independent Oil Exploration Companies, said the project had already been marginal before the sudden tax increase. Valiant has not identified the prospect.
News it had dropped the project emerged less than 24 hours after Norwegian giant Statoil said it had halted work on its £3billion-plus plans to bring the Mariner field into production.
Ithaca said yesterday it had entered into an agreement to acquire non-operated interests in the Cook and Maclure fields, of 28.46% and 7.41% respectively, plus a 10% stake in three exploration blocks.
Shell-operated Cook is in the central North Sea, while BP-run Maclure is in the northern part.
Ithaca, among companies which could benefit from the tax rise because of large allowances, said the acquisition from US-based Hess diversified its North Sea production base, adding: “Final negotiations to crystallise the transaction were conducted after the recent changes to the UK fiscal system.”
Simon Lockett, chief executive of Premier, said recently the hit on UK oil and gas production might actually help his firm, which was “sat on” tax allowances worth £679million and could benefit from any fall in the value of North Sea assets.
Despite widespread concern elsewhere in the industry, Mr Lockett said the move would have no impact on Premier’s North Sea business.
In an update on drilling plans for the Fyne area in the central North Sea, Mr Lockett said: “Where Premier sees good opportunities, we will continue to invest in the North Sea.”
It is going ahead with appraisal drilling at East Fyne under a joint-venture agreement with Antrim Energy.
Premier will, subject to partner and government approvals, acquire a 39.9% stake in the block containing Fyne in return for paying up to £31.5million towards field-development costs.
The company also has a 50% stake in a drilling programme due to start soon in the Greater Fyne area.