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Why Is This Private Equity Fund Scooping Up Billions In North Sea Assets

North Sea rig

I’ve been discussing the return of big oil and gas M&A the last several weeks. And yesterday we got more confirmation it’s “money on” right now in the global petroleum sector — with one of the biggest single deals in years coming down in an unexpected place.

From a virtually unknown acquirer — which has instantly become the largest independent producer in the neighborhood.

That’s a London-based firm called Chrysaor Holdings. Which yesterday unveiled a $3.8 billion purchase of North Sea assets from Shell.

Under the deal, Chrysaor is buying Shell’s working interest in seven North Sea projects. Coming with a current 115,000 b/d of oil equivalent production — plus another 13,000 b/d production in the Shetland Islands, which is expected to be onstream soon.

In total, Chrysaor will acquire 350 million barrels of proven and probable reserves — making the firm the largest U.K. independent producer focused on the North Sea. In fact, one of the largest producers overall in this area.

Here’s the most interesting part: the deal appears to have been orchestrated by private equity backers. With Chrysaor paying for the assets partly through a $1 billion investment from PE outfit EIG Global Energy Partners.

That’s a very telling move, given that EIG is a Washington, D.C.-based fund that has to-date focused on U.S. oil and gas projects — with some stepouts to Australia and South America. Related: Why Is Everyone So Bullish On Oil?

But now this big buyer want to take a run at the North Sea. Suggesting management sees potential in this mature basin, even as majors like Shell exit in favor of higher-impact plays.

This is much like what happened in the U.S. Gulf of Mexico shelf the last few years. Where majors like Chevron sold big asset packages to private equity-backed E&Ps.

It will be critical to see what happens next. If new kids like Chrysaor can indeed grow production and reserves, it could encourage further PE purchases of mature assets. Watch for operational updates from the North Sea’s new leading producer.

Here’s to doing the shuffle.

By Dave Forest

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  • Nick on February 01 2017 said:
    EIG's precursor company was called TCW - which made a number of investments in the UK North Sea, including a successful vehicle called CH4 (run by now-CEO of Chrysaor). Blair Thomas (now CEO of EIG) personally led most of those deals for TCW - so less surprising in that light.

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