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West of Shetland M&A proves positive

PE-backed Siccar Point sees recent ownership changes in West of Shetland assets as useful re-organisation

Siccar Point Energy remains bullish on its core West of Shetland (WoS) region on the UK continental shelf (UKCS), based on its excellent exploration and production potential. And it is unfazed at recent M&A activity that has seen some US majors make or plan exits from the province.

The firm, founded in 2014 with backing from private equity (PE) heavyweights Blue Water Energy and Blackstone Energy, operates WoS assets including the Cambo field, with estimated reserves of 900mn/boe of oil-in-place. Its CEO Jonathan Roger told Petroleum Economist on the sidelines of Aberdeen's Offshore Europe conference that Cambo could be sanctioned as soon as early next year.

The WoS story has been generally positive, but there have been a few bumps in the road of late. Is that simply to be expected in a relatively frontier area? Do you retain your WoS enthusiasm?

Roger: Siccar Point sees the WoS as the most exciting growth area in the UK. The statistics make the potential there clear. [Consultancy] Wood Mackenzie estimates that 50pc of UK production will come from the area in the next decade, and around 50pc of the UK's exploration potential is also sitting in the region.

The WoS is absolutely a core part of our business and we are very positive on its future. It is a little more challenging than other parts of the UK, but not dramatically so. Compared to the northern North Sea, for example, the environmental conditions are not significantly different.

"The right people and resources are in place to develop the West of Shetland's potential" —Roger, Siccar Point

Are you slightly surprised that some larger global players are still selling down and out of WoS? Or is that just an opportunity for existing and new actors to expand their positions and for overall ownerships structures to become even more strategically aligned?

Roger: There is a need to explore who the sellers and buyers really are in that area. Yes, we have seen a retreat by US-headquartered majors, but also a positive consolidation where the likes of BP, Shell and Equinor are concerned. These firms all see the WoS as core parts of their portfolio.

This is not a 'majors exodus' story, it is necessary to look at all the different levels of activity there and understanding what is driving it. This is all positive for us as the right people and resources are in place to develop the region's potential.

There are obviously UKCS assets out there for sale. Given that Siccar Point has kept its powder relatively dry since its late 2016 OMV deal, might we expect any activity if assets that align with your core areas become available?

Roger: We are sitting on one of the largest discovered resource bases on the UKCS-well over half-a-billion bl of discovered resources. Look at our portfolio-long-life, low-cost assets with no decommissioning issues and production planned out to the 2050s. On the other hand, look at some of the other businesses, they do not necessarily fit from a quality standpoint.

So, our focus is very much on organic growth. Mariner has recently come on stream, there are the Cambo and Rosebank developments, so the plan is to take this business to 80,000bl/d by the mid-2020s.

I am sure that we have got the firepower to do other deals if we see the right one. But it needs to fit with us in terms of quality-that is the lens we put on it.

If we look ahead to PE investors' exit from the North Sea, and should your story lead to an IPO, what is the differentiation that Siccar Point will bring to market to attract equity investors that may not be particularly excited about oil and gas?

Roger: Our business is highly differentiated. Building this business, we have focused on creating something that is unique in terms of its quality and growth potential. That stands us in very good stead whatever form that exit ultimately involves. Our combination of long-life assets and low operating costs, along with discipline and innovation, really makes us a unique business on the UKCS. In addition, we are focused on WoS, the UK's last big growth area.

The UKCS often gets bucketed altogether. But you have really got to look at the different regions of the UK and the different maturity levels.

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