Kerr-McGee parts with certain North Sea assets, Hutton TLP

Sept. 6, 2002
Kerr-McGee has sold its interest in certain of its UK North Sea assets, including the Hutton tension leg platform.

By OGJ editors

HOUSTON, Sept. 6 -- Kerr-McGee has sold its interest in certain of its UK North Sea assets, including the Hutton tension leg platform.

Last month, Canadian Natural Resources Ltd., Calgary, purchased exploration properties in the North Sea from a unit of Kerr-McGee for $120 million in cash. The deal also calls for a unit of Canadian Natural to surrender some of its interest in Harding field to Kerr-McGee, increasing the Oklahoma City-based independent's interest in the field to 30%.

In a separate transaction, Kerr-McGee, through its affiliate Kerr-McGee Resources (UK) Ltd., sold its 14.49% interest in Ross field, which lies in the UK North Sea, to Paladin Expro Ltd., a wholly owned unit of London-based Paladin Resources PLC.

UK field sales
Kerr-McGee subsidiary Kerr-McGee North Sea (UK) Ltd. sold its interests in the Murchison, Ninian, Columba, Lyell, and Strathspey fields to Canadian Natural. The deal included associated assets and undeveloped acreage in the northern North Sea. In turn, Kerr-McGee acquired an additional 5% interest in Harding field on Block 9/23b in the North Sea's Quadrant 9 area through a transaction with Canadian Natural unit CNR International (UK) Ltd.

Kerr-McGee said the deal will reduce its net reserves by 50 million boe and reduce its production volume by 26,000 boe/d. The deal, effective July 1, is expected to close in the fourth quarter.

Canadian Natural will assume all decommissioning obligations associated with the divested fields. Kerr-McGee said it had accrued $143 million in decommissioning costs through June 30 for the assets. Including the accrual for the decommissioning expenses, Kerr-McGee said its operating expenses are expected to decline by $120 million/year, which equates to a 25% reduction in its North Sea unit's operating expenses.

"This transaction is a continuation of our strategic plan to maximize the value of our assets and reduce unit operating costs," said Luke R. Corbett, Kerr-McGee chairman and CEO. "Our primary focus remains on growing our core operating areas—worldwide deepwater trends, the US onshore and Gulf of Mexico, the UK sector of the North Sea, and China's Bohai Bay." The company said it would maintain a "strong presence" in Quadrants 9 and 30 in the UK North Sea.

"It's a corporate objective to have fairly high working interests and operatorship (control) in areas that we're in, and the North Sea was the one area where we had not accomplished that until this transaction," said John Langille, Canadian Natural president.

Salman Parnters Inc. analyst Stephen Calderwood praised the deal, saying Canadian Natural's increased ownership would enable the firm to control the pace of development at neighboring fields. "It's a very strategic step for Canadian Natural to take," Calderwood said. "They should be able, especially with the Columba and Ninian synergies, to reveal some extra value here," he added.

Canadian Natural said that the acquisition will increase its North Sea light oil production by 20,000 b/d to 47,500 b/d of oil. The firm also has increased its 2002 capital budget to $1.7 billion (Can.), up from a previous target of $1.5 billion (Can.).

Canadian Natural said it was buying an interest in the Strathspey field, 12 licenses covering 20 exploration blocks and partial blocks, and additional equity in the Brent and Ninian pipelines and the Sullom Voe terminal.

Meanwhile, Kerr-McGee's divestiture of its interest in Ross field became effective July 1 and was valued at $22 million. The deal is expected to close in the third quarter, and UK government approval is required. Kerr-McGee said it would use the deal's proceeds to reduce debt.

Hutton TLP sale
Another Kerr-McGee unit, Kerr-McGee North Sea (UK) Ltd., sold the Hutton tension leg platform to Monitor TLP Ltd. for $29 million, net to Kerr-McGee. The company said that it would use the proceeds from the sale to reduce debt.

The Hutton TLP was removed from the Hutton field as part of the decommissioning program approved by the UK Department of Trade and Industry in May. The TLP was installed by then-Conoco Inc. in 1984, marking the first commercial use of TLP technology for an offshore platform.

The Hutton field is operated by Kerr-McGee with 58.74% interest. Other Hutton field partners are Enterprise Oil UK Ltd. (acquired by Royal Dutch/Shell Group) 9.54%, Cieco Exploration & Production (UK) Ltd. 8.63%, Lasmo (ULX) Ltd. 8.63%, CNR International (UK) Ltd. 7.76%, and Westoil Operations Ltd. 6.70%.