Economic Report 2018

5.6 ‘The Changing Face’ of the UKCS

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Companies continue to see the UKCS as an attractive place to do business, demonstrated by the number of new entrant companies who have entered the basin in recent years.

The value of M&A activity associated with assets on the UKCS was greater than $8 billion in 2017, with activity so far in 2018 being significantly lower than this as companies see the opportunity to pick up assets at the ‘bottom of the cycle’ closing. Examples of activity announced in 2018 include: • BP acquiring an additional 16.5 per cent stake from ConocoPhillips in the Clair field, west of Shetland – increasing its overall equity share to 45.1 per cent. • Verus Petroleum picking up a 16 per cent stake in the Alba field from Equinor and 47 per cent of the Babbage field in the southern North Sea. In addition, Verus acquired a 50 per cent stake in the Cobra prospect (also in the Babbage area). • Siccar Point farming out a 30 per cent stake in the west of Shetland Cambo discovery, along with a 22.5 per cent stake in the Blackrock prospect in the same area. • Chrysaor increasing its stake in the Armada area to 100 per cent, following the purchase of Spirit Energy's equity across the remaining fields within the area. • Neptune Energy has increased its presence in the UK through the acquisition of a 35 per cent stake in the Seagull Some increase in M&A activity can be expected throughout the second half of 2018, as companies continue to optimise their portfolios. The recent announcement by Chevron to market its assets in the central North Sea could also attract interest from recent UKCS entrants and/or companies looking to gain a foothold in the basin. Although majors such as BP, Shell and Total have demonstrated their ongoing commitment to the basin, albeit in a more focused portfolio, many of the recent acquisitions have been backed by private equity investment. The influx of private equity into the UKCS has not previously been seen on this scale – historic investments have tended to be smaller-scale and more focused on exploration plays. Private equity-backed investors have been attracted by the opportunities in the basin, in both later-life assets and new developments. They see growth potential and value within assets which have suffered from under-investment, as investment opportunities struggled to compete within the previous owners’ portfolios. development and 50 per cent of the Isabella prospect from Apache North Sea. • RockRose Energy acquiring Dana Petroleum’s 20.43 per cent stake in the Arran field.

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Attention is now turning to the impact that new owners are having on the investment and production profile of newly acquired fields.

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