Economic Report 2018

Through to 2030 it is anticipated that the impact of new investment and activity, stimulated by M&A within a cross-section of assets which have changed hands during the last 18 months, could result in an additional 125 million boe being recovered compared to the no-further-investment case. Investment opportunities which were not attractive or competitive within previous owners’ portfolios are now being reconsidered and progressed by the new asset owners, and it is possible that more than £500 million of new capital investment could be unlocked across these assets by 2030.

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CASE STUDY

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Only 18 months ago, the Armada facility was regarded as uneconomic and production was set to cease in June 2018. Today the Armada Hub is rejuvenated. Chrysaor, the new operator and 100 per cent owner, has confirmed a three-well program on the Maria and Hawkins fields and the possibility of a further two on the Seymour field. The Rowan Gorilla VII rig is already drilling at Maria, and the first well is on track for completion within weeks. As a focused North Sea operator, Chrysaor can capture unrealised upside in Armada which was non-material for other owners. This combined with an innovative partnering arrangement with BHGE, and the application of technologies, means development of these reserves is now commercially viable; a testament of the OGA’s “Maximise Economic Recovery” ambition. Chrysaor was successful in the 30 th Licensing Round in acquiring adjacent acreage which may in turn be developed using Armada infrastructure. With its life extended to at least 2025, Armada is also an attractive potential export route for third party developments.

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In challenging times for the basin, Armada shows how a fresh view and commitment can make a positive impact.

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It will be interesting to observe how private equity-backed companies continue to develop their position in the basin. Private equity funds typically plan to hold their investments for around five years, and therefore their exit strategies from the UKCS will need to be considered. However, it is also possible that they may look to stretch the horizons of their investments in the basin. Longer term, there are numerous options which could be considered by investment funds. Companies may look to an initial public offering (IPO), which could create a raft of new ‘mid-cap’ companies. Alternatively, they may also look to monetise their assets, either at the pre-development or production stage.

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The strategy adopted by the fund will be determined by the portfolio of assets and development opportunities, as well as the prevailing market conditions, as companies look for the optimum time to sell.

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