- Buyers, sellers accept that oil price will be lower for longer
- Private equity-backed Siccar buys stake in North Sea field
The gap between buyers’ and sellers’ asset valuations in the North Sea is narrowing as people realize that oil prices will stay lower for longer, according to private equity firm Blackstone Group LP.
Siccar Point, owned by Blue Water Energy and funds managed by Blackstone Energy Partners, said Tuesday it purchased an 8.9 percent stake in the Greater Mariner Area off the Shetland islands from JX Nippon Exploration & Production U.K. Ltd. The exploration and development company could spend “well in excess” of its initial $500 million funding on U.K. North Sea assets should opportunities arise, Mustafa Siddiqui, a London-based managing director at Blackstone, said Wednesday.
The Siccar deal comes almost two years into a crude-price slump that forced companies to review their asset portfolios in an effort to raise cash and cut costs. BP Plc and Royal Dutch Shell Plc are both said to be considering selling assets in the U.K. North Sea, where costs are high compared with other oil-producing areas.
“Sellers and buyers, two years into the downturn, have a better understanding,” Siddiqui said by phone. “People have come to realize that it’s lower for longer” and the spread between what sellers were asking and what buyers were willing to pay for some assets was wider a year ago, he said.
While Tuesday’s deal gives Siccar Point a relatively small stake in the Greater Mariner area, the company would be open to becoming an operator in future projects, Siddiqui said.
Statoil U.K. Ltd, a unit of Norway’s Statoil ASA, is the operator of Greater Mariner with a 65 percent stake, followed by a 20 percent interest of JX Nippon. Dyas Mariner Ltd is the smallest stakeholder with a 6 percent stake, according to a statement by JX Nippon.
In the long term, oil prices will recover although “we’ll see some volatility in the meantime,” said Siddiqui.