As this website joked this morning; British Gas owner Centrica should have enough money in the bank to cover the cost of a good Christmas party.
The 69% shareholder of Spirit Energy this morning announced the sale of the Norway business for £800 million to Sval Energy and Equinor.
The only Spirit Norway asset not being transferred to Sval Energy is the Statfjord field ownership; this will be acquired by Equinor for a total consideration of USD 50 million, plus a contingent payment linked to commodity prices. The transaction includes a decommissioning liability of £830 million, split between Sval and Equinor.
Spirit Norway has got a diverse portfolio of eleven producing assets, with some of them having a fair number of years of production ahead such as Nova, Kvitebjørn and Ivar Aasen. In addition, if Wintershall manages to get Maria back in full swing, this field may have got up to 55 MMboe left to produce.
Following the acquisition, which is Sval’s 6th since acquiring Solveig Gas in 2019, plateau production from the combined company is expected to reach 60,000 boe/d in 2023.
Two dry wells
The two most recent exploration wells drilled by Spirit Norway turned out dry. Last year, it completed 16/1-33S to the north of the Ivar Aasen field targeting the Triassic and Middle Jurassic Sørvesten prospect. The company’s ambitions in the Barents Sea were probably lowered significantly after the Sandia prospect came in dry when completing well 7321/8-2S.
Why only Norway?
An interesting question is why Spirit was not sold as a whole, including the UK and the Dutch assets. This may have something to do with the remaining potential of the producing fields and investments made. For instance, Spirit UK bought into a number of West of Shetland licences in a hope to share the success of the fractured basement play. This has not panned out in the way the company hoped, and this major investment will be unlikely to be recouped through production in the area.
At the same time, the company will probably not produce from the Chestnut field a lot longer and also operates some gas fields in the Southern North Sea and the Irish Sea which are getting close to the end of their lives. The exception to this is the Cygnus field, in which Spirit has a 61.25% interest and which has a planned abandonment year of 2048.
In that light, it is telling that Centrica chief executive Chris O’Shea said that what remains of Spirit will ‘effectively be in run-off’ as the company halts exploration to focus on ensuring it can meet the shutdown costs of its assets.
HENK KOMBRINK
