Production from Magnus, where BP recently completed a life extension program, averaged around 16,000 boe/d last year.
The $85-million deal, which is subject to partner, regulatory, and other third-party approvals, would give EnQuest around 15.9 MMboe of net reserves through gaining 25% of BP’s 100% stake in Magnus; a similar share of BP’s interests in the pipelines; and a 3% interest in the SVT.
The assets covered include 9% of BP’s 36% stake in the Northern Leg Gas Pipeline (NLGP), and 3.83% of its 15.32% interest in the Ninian Pipeline System (NPS), and transfer of operatorship. EnQuest currently owns 3% in the SVT, 5.9% in NLGP, and 2.7% in NPS.
It plans to finance the transaction via sharing of future cash flows from these assets - the accord does not include any upfront payment to BP.
In addition, the company has the option, exercisable between July 1, 2018 and Jan. 15, 2019, to purchase BP’s remaining 75% share of Magnus, a further 9% in the SVT, and the remainder of BP’s interests in the associated pipelines for $300 million.
If EnQuest takes up this option, BP would retain 50% of net cash flows from the assets up to a maximum of $1 billion. Again, EnQuest would fulfil the purchase through a mixture of cash and future asset cash flows.
BP group CEO Bob Dudley said: “EnQuest’s experience of investing in and extending the life of mature assets in the North Sea make them a natural operator of Magnus and Sullom Voe in this later phase of their life.
“We believe this will enable them to prolong the life of the assets, benefiting the region and creating additional value for both EnQuest and BP shareholders. In addition to investing in and growing our core businesses, BP will continue to seek innovative opportunities such as this to work with partners to maximize value creation from our entire portfolio.”
Mark Thomas, BP North Sea Regional president, said: “In recent years, we have been focusing our North Sea portfolio around core assets west of Shetland and in the central North Sea - bringing new fields into production, redeveloping and renewing existing producing facilities, acquiring new acreage and interests through license rounds and farm-ins and selling some of our mature assets to those who see greater strategic fit with their businesses.
“Sullom Voe and Magnus have been great businesses for BP, but to maximize the economic life of these important assets, we believe this deal will offer them a better long-term future.
“With their integrated skills, operational scale, cost structures and high levels of operating efficiency we have seen what EnQuest can do on the Thistle, Deveron, and Don fields that were previously operated by BP. We believe this is a good example of having the right assets in the right hands, offering new opportunities for the assets and benefitting the UKCS, in the spirit of maximizing economic recovery (‘MER UK’).”
EnQuest CEO Amjad Bseisu said: “Magnus is a good-quality reservoir; it has large volumes in place, with potential for infill drilling and for the revitalization of wells, and scope for field life extension. It is a producing asset that would materially increase EnQuest’s reserve base.”
BP will continue to export oil production from the Clair field, along with the current Clair Ridge development (both west of Shetland) through the SVT.
Gas from the Foinaven and Clair fields will also continue to be processed through the SVT. Gas from the re-developed Schiehallion and Loyal fields will export to SVT once production re-starts in the coming months.
The SVT and Magnus should transition to EnQuest as fully operational entities, along with the staff that operate and support the facilities. Around 100 BP personnel work on Magnus and associated infrastructure and around 240 on the SVT.
BP aims to complete the sale and transfer of operatorship later this year.
EnQuest also has the option to receive $50 million from BP in exchange for undertaking management of decommissioning activities for the Thistle and Deveron facilities (originally developed by BP but now operated by EnQuest).