Ithaca Energy (LON: ITH) will buy out Shell’s (LON: SHEL) stake in the Cambo oilfield, becoming the 100% owner of the West of Shetland project.
A fresh sales process to find a new buyer for the Shell stake was launched in May, after the supermajor said it would not progress with the controversial project back in December 2021.
Out of that, it was hoped a new buyer could be found, or that Ithaca would ultimately take the remaining share.
Today, Ithaca announced it will now acquire the stake with “minimal near-term cost exposure,” subject to regulatory approval.
Alan Bruce, CEO of Ithaca Energy, said: “We are pleased to conclude the marketing process with Shell and to take full ownership of the Cambo development. Our primary focus continues to be the delivery of our BUY, BUILD and BOOST strategy, including the future development of Cambo, subject to fiscal conditions.
“We believe that Cambo has an important role to play in providing energy security and economic benefit to the UK, while reducing overall emissions intensity.”
A Shell spokesperson said: “After comprehensive screening of the Cambo development, we concluded at the end of 2021 that we did not wish to move forward with the project at that time.
“Having now agreed the sale of our stake in it, we wish Ithaca every success in developing the field.”
© Supplied by DCT Media/ Wullie MaCambo is the second-largest untapped oil and gas discovery in the UK after Rosebank, which Ithaca also holds a stake in.
Both projects are major battle grounds for climate campaigners.
Cambo is estimated to hold up to 800m barrels of oil in-place, with the first phase expected to recover 170m barrels.
The value of the Shell deal has not been announced, but Ithaca said terms are payable on first oil, or receipt of payment to any subsequent farm-down of the stake by Ithaca, and is subject to Ithaca proceeding to a final investment decision and/ or the NSTA regulator providing development consent.
It means Ithaca may decide to pursue a further sale once this deal completes.
Ashley Kelty, analyst at investment bank Panmure Gordon said: “The deal will add 52mmboe of 2C resource to its resource base, and removes the partner drag created by Shell’s exit.
“This will boost ITH position west of Shetland with the company having a stake in the two biggest UKCS developments in Rosebank and Cambo. Negative side is that it will attract the ire of the eco-lobby who want to stop UK oil developments, yet wilfully ignore the negative impact of importing fuels with the actual increase in emissions.”
Windfall tax and project timeline
Ithaca has been highly critical of the current UK tax regime, saying last month that “there are no windfall profits” left in the industry.
The London-listed independent said the windfall tax had “severely dampened” investment.
Ithaca had at one point hoped to take a final investment decision on Cambo in the first half of 2023, however the firm warned that may be pushed back due to the levy.
It is not clear how this latest sale will impact the FID timeline.
Earlier this week,analysts from Jefferies removed the Cambo and Marigold projects from its core net asset value (NAV) assessment of Ithaca “due to lack of commercial progress.”
Commenting on the Shell deal, Greenpeace UK climate campaigner Philip Evans said: “Rishi Sunak is fully aware that new oil and gas projects will only intensify the climate emergency, while doing nothing to relieve the cost of living and energy crises people across the UK still face.
“Rather than flogging a dead horse, the government should stop new drilling in the North Sea and instead invest in insulating our energy-wasting homes and buildings and upgrading our outdated grid so that we can unleash the potential of the cheap homegrown renewables we need to power us into the rest of this century.”
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