The already grim mood of North Sea oil and gas operators got a shade darker with independent exploration firm First Oil Expro calling in administrators on 22 February, unable to cope with a 36% decline in Brent oil prices noted in 2015.
In doing so, the Aberdeen-based company, founded by tycoon Ian Suttie in 2001, became the first British oil and gas producer with exposure to the North Sea to go into administration since the slump began in 2014. There are well grounded fears it may not be the last.
The company’s own administrators KPMG just about summed up the situation noting it was a reflection of the “significant challenges facing UK North Sea oil and gas companies in the current oil price environment.”
True to industry form suitors queued up for First Oil’s holdings on sale. It was announced that Enquest and Cairn Energy will takeover the company’s 15% stake in the Kraken North Sea oilfield, 80 miles east of Aberdeen.
Enquest will now have a 70.5% interest in the oilfield, and Cairn a 29.5% interest. But the devil is in the detail – both parties are not paying for the stake, rather waiving unpaid drilling bills. First Oil had already begun reviewing its operations last year in wake of the oil price slump.
Zennor Petroleum is expected to takeover its interests in the Mungo and Monan, Bacchus, Cormorant East and Causeway fields. Blair Nimmo, joint administrator and head of restructuring at KPMG Scotland, said, “These sales will ensure First Oil’s four largest field interests are smoothly transferred to new ownership, and provide time to resolve the position concerning the smaller assets in the group’s portfolio.”
Of course, each company’s management of its finances is unique but there is an unmistakable undercurrent of wider industry malaise to it all. According to Wood Mackenzie’s research, based on an examination of 10,000 oilfields around the world, one barrel in every 30 oil barrels is being produced at a loss. However, the figure rises to one in seven barrels for the British offshore sector......MORE
Monday, February 22, 2016
"One In Seven U.K. North Sea Oil Barrels Being Produced 'Below Cost'"