Chrysaor aims to cross the UK-Norway divide
Grevling farm-in makes Chrysaor the second private equity-backed North Sea producer to straddle UK and Norwegian waters
Chrysaor, the North Sea independent backed by Harbour Energy, an oil and gas acquisition fund raised by EIG Global Energy Partners, received approval in late October for its farm-in to the Grevling discovery in the Norwegian North Sea.
The deal, first announced in March, sees Chrysaor taking a 15pc stake in Grevling from operator Okea, another private equity (PE)-backed Norwegian independent, with an option to increase its ownership to 35pc. The entry into the Norwegian continental shelf (NCS) makes Chrysaor, after Neptune, the second PE-funded producer to encompass both the UK and Norwegian sectors. Grevling may, though, ultimately be tied back across the maritime boundary line to Chrysaor's Armada hub on the UK continental shelf (UKCS).
The 11-year old company has been super-charged since the January 2017 injection of funds from EIG, facilitating a $3bn purchase from Shell of a portfolio of North Sea field interests. The assets included Shell's stakes in Beryl, Bressay, Buzzard, Elgin-Franklin, Erskine, Everest, Armada, J Block and Lomond, as well as a 10pc stake in Schiehallion, vaulting Chrysaor to the number one UKCS independent producer slot.
The firm followed up with a March 2018 purchase of stakes in the Armada, Maria and Seymour fields from Spirit Energy, a joint venture between UK utility Centrica and German midstream firm Bayerngas, and then the Grevling farm-in. It is also active in Ireland.
The Shell deal gave Chrysaor 100pc ownership of Everest and Lomond, while the Spirit deal also took it to sole operatorship of the Armada complex. The firm's CEO Phil Kirk, who led the 3i-backed CH4 Energy in the 2000s, says focus is a crucial aspect in making PE-funded companies nimbler than global or integrated operators.
"There is a whole variety of private equity owners—no two investor funds or companies are the same. Fundamentally how can they make the difference? They would like to say they have the very best people, but we are no cleverer than anybody else. It is actually about having a shorter to do list, shorter reporting lines and fundamentally, more focus," says Kirk.
Focus, in Chrysaor's case, is already bearing fruit. Former owner BG had planned to shutter Armada this year but Chrysaor has given the platform a stay of execution, not least to support a drilling campaign on the nearby Maria field.
"We have our first well completed on Maria and tied back Armada. That should be producing—fingers crossed, God willing—sometime in the next 10 days," says Kirk. "Out with that, over the weekend, Armada was producing 10,000bl/d oe. This is 10,000bl/d oe of oil and gas which, in today's commodity price environment, when the field is meant to be shut in, is quite a nice measure of what the crew have achieved. And that is without any new drilling."
Everest and Lomond will see the same approach. "This is just the basic business where we look to potential opportunities to tie back to infrastructure, exploration, third-party business. We are looking to help prolong the life of our assets," says Kirk.
He is coyer about his investors' exit plans. Typically, PE would take a five to seven-year investment timeframe, but Kirk echoes the words of EIG CEO Blair Thomas when saying his investors are "permanent".
"We are backed by permanent capital—which means we have the same time lines or longer than most companies," says Kirk.
He is also eyeing more acquisition opportunities. Consultancy Wood Mackenzie estimates that firms such as Chevron, which has put its Central North Sea portfolio up for sale, Total and Hungary's MOL could put up to $8.8bn worth of North Sea assets up for sale. "We look at inorganic and organic growth. We are robustly financed. We are spending $500–600mn in capex in the next few years. We have the capacity to make acquisitions, but they have to work strategically," says Kirk.