Wood Mackenzie: Apache's Forties deal indicative of North Sea trend

By OGJ editors

HOUSTON, Jan. 20 -- Houston independent Apache Corp.'s acquisition of a 96.14% stake in North Sea Forties oil field from BP PLC signals the beginning of a new trend in the development of the UK North Sea industry, analyst Wood Mackenzie Ltd. said.

"With UK oil production peaking in 1999 and large new development projects now a rarity, we believe that we are set to see an increase in asset trading with the supermajors set to divest non-core core assets and looking to consolidate their holdings in key areas, particularly around infrastructure hubs. It is significant that BP has chosen to retain the Forties pipeline infrastructure while disposing of the field," Wood Mackenzie said in a Jan. 16 research note.

Apache's transaction costs for Forties field were $630 million (OGJ Online, Jan. 13, 2002). The Forties pipeline is not included in the sale, BP said.

"The benefits will flow two ways, with the supermajors able to refocus resources, cut costs, and monetize noncore assets, and the smaller companies seeing incremental value in assets which are immaterial to the larger companies," Wood Mackenzie said.

Recent new start-up companies, new entrants to the North Sea such as Apache, and others with existing positions who view the North Sea as a potential growth area all are set to benefit from this trend, the firm added.

At the same time, the UK North Sea will remain an important element in the majors' portfolios.

"Indeed, the importance of these, in terms of each company's overall portfolio, may be enhanced through deals aimed at increasing their stake in these core assets. However, we do believe that the supermajors are set to embark on a rationalization program which will increase the percentage of assets in the UK North Sea, owned and operated by smaller companies," Wood Mackenzie said.

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