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Zennor sets sights on CNS upside

Private equity backing ensures CNS player has a war chest for future acquisitions

UK producer Zennor Petroleum is targeting output of up to 35,000bl/d in 2023 as its Central North Sea (CNS) portfolio ramps up to full production. 

The region continues to see plenty of activity, despite its maturity, managing director Martin Rowe told Petroleum Economist at September’s Offshore Europe conference in Aberdeen. And Zennor, which received investment from private equity (PE) backer Kerogen Capital in 2015, has $100mn in reserve for small and focused portfolio additions. 

In general, how healthy is the CNS, the “engine room of the North Sea” as it were, looking? 

Rowe: There is a huge amount of activity there, both for ourselves and other companies. The next slew of development projects for us will be primarily CNS focused, specifically in the Finlaggan area. The first of these is Greenwell, which is an extension of the Callanish field. We are looking to drill a well on that next year, with first oil [targeted] in 2022.

Zennor has also picked up a discovery that we have called Leverett. Effectively, it is a lookalike to Finlaggan but on the northern side of the Rattray High, where Finlaggan is to the east. It is going into development targeting first production in 2023. So, the next raft of projects is lined up and ready to go. 

Would the CNS benefit from further consolidation of ownership structure, or are improvements in collaboration between players in different licences but with mutually beneficial plans going to be enough to unlock remaining volumes and value? 

Rowe: The consolidation over the last couple of years with a number of the big infrastructure hubs changing hands has been and will be very positive. Zennor wants to see activity; we want an infrastructure owner that is keen to see our barrels come through. With [fellow UK independents] Chrysaor at Britannia and J-Block, and Ithaca at Alba and Captain, this should happen. That is not to say there will not be further consolidation. But we do not think it is necessary.   

“There is a huge amount of activity in the Central North Sea” Rowe, Zennor

Is the UKCS regulatory regime fit for purpose? Is the UK North Sea industry getting sufficient political support and attention at a time crucial for maximising long-term recovery but in a country with of a lot of political distractions?   

Rowe: Yes it is, and the Oil and Gas Authority (OGA) is doing a good job of walking a tightrope between the three roles it has set up for itself—regulator, facilitator and promoter. The OGA has been very supportive of Finlaggan and that help has been hugely constructive. From a regulatory standpoint, the OGA is finding its feet very well. 

There are obviously assets out there for sale. Given that Zennor has made only relatively small additions to the portfolio since the First Oil deal, might we expect any activity if assets that align with your core areas become available? 

Rowe: We currently have 4,000-5,000b/ld of net production which comes from assets we acquired from First Oil and from the Britannia interest we acquired from Mitsui. Finlaggan is going to drive us to 20,000bl/d net and then Leverett and Greenwell will push us towards 30,000-35,000 bl/d net in 2023 when those assets are online.

What’s really exciting for us is that this growth programme is fully funded. We have got a chunk of undrawn equity from Kerogen of some $100mn, which, added to cash flow from our producing assets and the existing debt facilities, is enough to finance Leverett and Greenwell, and actually leave a little bit left over for us to do something else.

Our firm can do something else, but it would probably have to make sense in the context of our focus around Britannia and the ETAP area where we have existing ownership in the offtake infrastructure. So yes, but not big and fairly focused.  

How has the summer programme gone at Finlaggan? Does everything look on track for a 2020 start-up?

Rowe: Absolutely. The pipeline is laid and entrenched, and the umbilical is offshore right now ready to be laid in the next few days. The final step is the installation of the subsea isolation valve structure at Britannia, and that is scheduled for later this month [September]. So, all has gone smoothly and it is really pleasing to see the project’s progress.

How is progress on Platypus and Skua? Should we except FID in the relatively near future?

Rowe: Platypus and Skua FIDs are scheduled for 2020, around the middle of the year.

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