Ste. Nationale Elf Aquitaine has agreed to acquire Occidental Petroleum Corp.'s U.K. oil and gas subsidiary for $1.35 billion cash plus other considerations.
Elf will put the Occidental Petroleum Great Britain Inc. (OPGB) interests into a proposed new company to be owned two thirds by the French state owned company and one third by U.K. independent Enterprise Oil plc.
Enterprise in turn will put 19% of Nelson oil field--one of the biggest U.K. North Sea development projects--into the new company, Elf Enterprise Petroleum Ltd. (EEP).
Elf holds a 25% interest in Enterprise and will finance in part the Oxy acquisition by selling almost 15% of the U.K. independent. It will retain a 10.1 % stake as a trade investment.
In addition to the $1.35 billion in cash, Elf will take responsibility for about $150 million of OPGB outside bank debt and repay intercompany loan balances OPGB owes parent Oxy.
The U.K. government, which has a policy of discouraging purchases of private sector assets in the U.K. by foreign state owned companies, must approve the deal.
However, prospects of government intervention dim in light of U.K. Monopolies and Mergers Commission clearance of Elf's 1990 purchase of Amoco Corp.'s U.K. downstream oil assets.
DEBT REDUCTION PROGRESS
The North Sea sale is the biggest to date of several major asset sales under Occidental's debt reduction and restructuring program, announced earlier this year (OGJ, Jan. 21, p. 18).
Oxy Chairman Ray Irani said the sale was a major step towards the company's objective of reducing its debt by $3 billion--with at least half that reduction in 1991. He added that the deal and other transactions already announced (see story above) will have raised almost $1.8 billion in cash, net of taxes and debt assumed by buyers.
Earlier this year the company sold its liquefied petroleum gas/industrial gases terminal in Antwerp for $37.7 million in cash and debt assumption (OGJ, Mar. 18, p, 50).
POWERFUL NEW OPERATOR
Creation of EEP will introduce a powerful new North Sea operator.
The Oxy assets plus the 19% stake in Nelson will give it reserves of 300 million bbl of oil equivalent and peak production of 100,000 b/d in 1995.
With the venture's start-up, Elf will achieve its goal of becoming a major U.K. North Sea operator.
For Enterprise, the deal has removed uncertainty over Elf's 25% holding and frequent speculation Elf might bid to take over the U.K. company. Elf has agreed not to increase its remaining stake in Enterprise. If later it sells that stake, it will be done in consultation with Enterprise and not to a single shareholder.
ASSETS INVOLVED
OPGB is a key operator in the U.K. North Sea. Through ownership of Occidental Petroleum (Caledonia) Ltd. (Opcal), it operates Claymore field with a 23.4% interest and its satellite Scapa 36.5%.
Opcal, a British company that holds all of Oxy's U.K. North Sea license interests, also is redeveloping Piper field with the new Piper Bravo platforms.
In addition, it has Saltire, South Piper, and Chanter fields awaiting or under development. Oxy has a 36.5% stake in each of these fields.
In the Orkney Islands area, Oxy is operator of the Flotta terminal and the pipeline network to the Claymore/Piper area. It has reserves of 217 million bbl of oil and oil equivalent and has access to 25,000 b/d of production from Claymore and Scapa. EEP will take over all Oxy operations in London, Aberdeen, and Flotta.
ENTERPRISE ASSETS
Enterprise discovered Nelson on Block 22/11, which contains about 60% of the field's estimated reserves of 400 million bbl of oil and 200 bcf of gas.
Enterprise will contribute 31.9% of Block 22/11 to EEP--equivalent to 19% of total field reserves.
Nelson is being developed by Shell U.K. Exploration and Production, operator for the Shell/Esso combine that holds the remaining 40% of the field in Block 22/06a. Production is to start in 1993 and peak at 120,000 b/d of oil and 70 MMcfd of natural gas during 1994.
Once the field is on stream, Enterprise will assume operatorship, an arrangement unchanged by creation of EEP.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.