UK North Sea 2016 Activity: M&A Comes to a Standstill, Assets on the Market High; DECC Seen to Grant Licence Extensions, Easing Pressure on Operators to Drill Commitment Wells

LONDON--()--Oil and gas information and insight provider 1Derrick observed in its study that barring Premier’s $120 million offer for E.ON’s UK North Sea portfolio, M&A activity in UK came to a standstill.

“1Derrick anticipates E&A activity to stay slow in 2016 with Operators sitting on a significant inventory E&A drilling commitments. Drilling permits have been requested by Apache, Premier, Enquest, TAQA, Wintershall, and JXN.”

After a 6 month lull, BP drilled a wildcat on Farragon prospect. E&A drilling fell from 41 wells in 2012 to 20 in 2015. 1Derrick anticipates this to fall further in 2016. With 18 licences with firm drilling commitments, 1Derrick expects operators to request DECC an extension given the continued industry pressure.

M&A activity comes to a standstill

1Derrick data shows that M&A slowed sharply in 2016 at only ~$147 million till date. M&A in 2015 was robust at ~$2 billion, excluding Shell’s offer to acquire BG.

Assets on the market high

Total value of packages available in market in UK North Sea was ~$4.6 billion. In 2015, Endeavour (Alba, Bacchus and Rochelle fields), Eni (Judy and Hewett areas; Elgin, Franklin, Jade and Jasmine fields), Enquest (Kraken fields) and Sterling (Breagh, Cladhan and Crosgan fields) put assets on the market.

“Value of active packages added in 2015 was ~$2 billion or 43% of the total inventory. Before the 2014 oil price plunge, ~$4.2 billion worth of assets were on the market. Significant operators were ConocoPhillips (Clair) and OMV (Rosebank)”, Mangesh Hirve, Managing Director, 1Derrick.

Exploration activity dry; Operator may push their well planned for 2016

Only three E&A wells spud since October 2015 by BP (Farragon), Premier (Laverda/Slough) and Zennor (Finlaggan). E&A drilling has been falling steadily from 41 wells in 2012 to 20 wells in 2015.

“1Derrick anticipates E&A activity to stay slow in 2016 with Operators sitting on a significant inventory E&A drilling commitments. Drilling permits have been requested by Apache, Premier, Enquest, TAQA, Wintershall, and JXN.” Rajeev Singh, 1Derrick

Overall, 1Derrick estimates the exploration inventory to be high with 34 ready to drill licenses with firm, decided or in-progress drilling and 14 licenses with planned wells. There also are 249 licenses for which drill or drop well decisions are yet to be made.

1Derrick is an independent oil and gas research firm with offices in New York, Houston, London, Singapore and Bangalore. Derrick provides functional, comprehensive and cost-effective oil and gas sector M&A Databases and Global Business Development reports.

Contacts

Media:
1Derrick
Ajit Thomas
Ajit.Thomas@1Derrick.com
or
Mangesh Hirve, +44 20 3286 2640
Mangesh.H@derrickpetroleum.com

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