Chrysaor makes ‘material impact’ on UK while other newcomers ‘look to exit’

Chrysaor is the only new private equity-backed firm to make a “material impact” on the UK North Sea, according to new analysis.

Westwood Global reports that many of the 12 private equity firms still operating, which have entered the sector since 2016, will be “looking to exit sooner rather than later”.

The analyst firm has produced research into the 23 companies which have collectively spent £8.8bn on acquiring UK assets in the last three years, of which only a dozen remain active.

Chrysaor is the only one to make a “material impact on reserves and production”, Westwood said.

Meanwhile many new entrants’ appetites to buy assets “have not yet been matched” by their appetite to invest in new production.

Collectively the 12 firms control 14% of 2019 production and 12% of remaining reserves of which Chrysaor accounts for 70%.

The dozen have only sanctioned 128million barrels of oil equivalent, 4%of the North Sea total, funded only 3% of exploration wells and found just 1% of discovered volume since 2008.

The UK North Sea’s first final investment decision of 2019 was delivered by a private-equity-backed firm, when Neptune Energy sanctioned the 50 million barrel Seagull project in March.

Emma Cruickshank, head of north-west Europe at Westwood, said: “Although several of these companies are expected to increase their contribution by investing in developments and exploration, many of them will be looking to exit sooner rather than later.”

In April, Chrysaor signed a £2billion deal to acquire ConocoPhillips’ UK assets.

Westwood’s analysis also looks more widely at the 170 new companies that have entered the UK North Sea since 2008.

Of those, 72 remain active and only 31 currently hold reserves and production.

The new entrants since 2008 have only funded 16% of new exploration and moved just 577million barrels of reserves into production.

However, that is expected to change as they now control 60% of the 1.7billion barrels of unsanctioned and potentially recoverable resources and are expected to fund 70% of planned exploration over the next two years.

Westwood described this as a “step change” compared to previous levels.

Ms Cruickshank added: “The big deal values grab the headlines, but it is how new entrants balance reinvestment of cashflows from the assets they buy with paying dividends that will determine their lasting impact on the UKCS.”