North Sea operator Apache (NYSE:APA) has said it will cease operations in the UK by the end of 2029, blaming the impact of the windfall tax.
The American firm, now known as APA Corporation, said confirmation of changes to the Energy Profits Levy (EPL) in the recent budget meant it could not continue to invest in its North Sea assets.
“The Company determined the expected returns do not economically support making investments required under the combined impact of the regulations, and it will cease production at its facilities in the North Sea prior to 2030,” Apache said.
Apache chief executive John Christmann said this was “well ahead of what would have been an otherwise reasonable timeframe”.
In addition, Christmann also criticised requirements from UK regulator the North Sea Transition Authority (NSTA) for “substantial new emissions control investments”.
“After six months of evaluation, we have concluded that the investment required to comply with these regulations… coupled with the onerous financial impact of the Energy Profits Levy makes production of hydrocarbons beyond the year 2029 uneconomic,” he said.
The firm will run a “very limited capital programme” in the North Sea next year before its assets are decommissioned, Christmann added.
NSTA emissions regulations
In response to the Apache’s decision, a spokesperson for the NSTA said the regulator does not comment on the decisions of individual operators, and taxation is a matter for the Treasury.
“It is crucial that industry plays its part in supporting the UK on net zero by taking bold action to reduce its emissions,” the spokesperson said.
“The UK will need oil and gas for decades to come, but domestic production can only be justified if it continues to become cleaner.
“The NSTA has been clear that industry will need to deliver on its commitments to reduce emissions to ensure the UK can benefit from domestic resources and protect jobs as we transition to clean energy.”
Apache financial results
In its third quarter results for 2024, Apache posted a net loss of $233 million (£179m).
This included impairments of $793m (£611m) relating to its North Sea assets, which include the Forties and Beryl hubs.
Earlier this year, analysts warned Forties and Beryl would go “cash flow negative” up to 10 years sooner as a result of Apache’s decision to forego further drilling due to the windfall tax.
Apache said its outlook for other upstream markets, including the US and Egypt, is much more positive.
US production increased by 71% year-on-year for Apache, while the firm achieved 4% growth in Egypt. Apache is also progressing plans to resume drilling in Alaska.
North Sea departures
Apache’s latest announcement means it joins a growing list of North Sea operators drawing down their UK in response to the windfall tax.
Harbour Energy, Serica Energy, Deltic Energy, and Jersey Oil and Gas are among the firms looking to grow their international portfolios instead of investing in the UKCS.
Alongside the increase and extension of the EPL, analysts have also warned changes to investment allowances will see spending on new fields, particularly small ones, reduced.