LONDON (Reuters) - Oil producer EnQuest (ENQ.L) has agreed to buy a 25 percent stake in BP’s (BP.L) Magnus oil field and surrounding assets in the North Sea, financed through future returns, as it pursues its strategy of trying to breathe new life into old fields.
As part of the deal the North Sea-focused oil company will also take over operatorship of Britain’s largest oil terminal, Sullom Voe, on the Shetland Islands, an area tipped to hold many of Britain’s untapped oil reserves.
“It’s part and parcel of us taking maturing assets,” EnQuest Chief Executive Amjad Bseisu told Reuters.
His company’s strategy has been to buy up interests in mature fields for bargain prices and to apply new technologies and stricter spending programs to squeeze more out of aging infrastructure.
He said EnQuest’s aim was to reduce costs at Sullom Voe of around 150 million pounds ($188 million) a year to be able to run it for longer. It will retain all 340 BP staff at the Magnus field and the Sullom Voe terminal, Bseisu said.
Analysts at Mirabaud welcomed EnQuest gaining operatorship of the terminal, saying it gave it control over costs of using it after the company’s cashflow was hit in 2014 by higher costs.
EnQuest also has the option to buy BP’s remaining stake in Magnus and other interests by Jan. 15, 2019 for $300 million, the companies said.
“This will give us growth without spending significant capital,” Bseisu said, adding that owning 100 percent of Magnus would increase the company’s oil reserves by around 30 percent.
In a trading update EnQuest also said on Tuesday that it expected its production in 2017 to rise by up to 28 percent to a range of 45,000-51,000 barrels per day (bpd), mainly thanks to the expected second-quarter start-up of its Kraken field, compared with 39,751 bpd in 2016.
Shares in EnQuest were trading up 1.5 percent at 0923 GMT.
Editing by Mark Potter, Greg Mahlich