Shell said it completed the sale of a package of UK North Sea assets to independent firm Chrysaor for up to $3.8 billion.
Harbour Energy, an energy investment vehicle managed by EIG Global Energy Partners, is Chrysaor’s principal financial backer.
The deal includes an initial consideration of $3 billion and a payment of up to $600 million between 2018-2021 subject to commodity price, with potential further payments of up to $180 million for future discoveries.
The sale was announced on January 31, 2017, and has an effective date of July 1, 2016.
Completion follows receipt of all necessary regulatory and partner approvals.
The package of assets consists of Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Area, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion.
Shell retains a 44.9% stake in Schiehallion.
“Shell retains a significant, more focused and strengthened presence in the UK North Sea, to which it remains committed,” said Shell.
About 250 staff transferred from Shell to Chrysaor upon completion of the transaction.
“In Q4 2017, Shell will record an accounting gain on sale of $1 billion against the values of both the Shell and former BG assets included in the package,” said Shell.
“Completion of this deal shows the clear momentum behind Shell’s $30 billion divestment programme and is in line with Shell’s drive to simplify the upstream portfolio and re-shape the company into a world class investment.”
Shell’s stake in the assets sold was as follows: Buzzard (21.7%), Beryl (39.4%), Bressay (18.4%), Elgin-Franklin (14.1%), J-Area (30.5%), the Greater Armada cluster excluding Gaulpe (76.4%), Everest (100.0%), Lomond (100.0%), Erskine (32.0%) and Schiehallion (10.0%).
Chrysaor has assumed operatorship of Armada, Everest and Lomond.
Chrysaor said the transaction sees it become “the leading independent E&P company in the UK.”
It said production from the acquired assets is forecast to average just under 120,000 net barrels of oil equivalent per day for 2017, with current unit operating costs running at less than $15 a barrel.
The company now has 400 employees, with 200 based in its operations centre at The Capitol Building in Aberdeen, 150 working offshore and 50 at its corporate headquarters in London.
Phil Kirk, Chrysaor CEO said: “With the acquisition of this package of high quality, low cost production assets, Chrysaor becomes the leading independent in the UK North Sea.
“We are grateful to Shell for collaborating with our team to ensure a smooth and safe transition.
“I am excited at the prospect of our highly professional existing and new staff working together with our new licence and supply chain partners to develop and grow the company together.
“Safe and efficient operation of the assets is our primary objective as we pursue our development plans.
“We are already working hard to mature drilling opportunities in the Chrysaor-operated assets, secure further third party business for the hub assets, and actively support viable development initiatives proposed by our partner-operated assets.”
Chrysaor chair Linda Cook said: “With improving operating costs, competitive fiscal terms and a world class skills base, the North Sea is undergoing a period of rejuvenation.
“Through its acquisition of the Shell portfolio Chrysaor is now firmly placed to take advantage of this change.
“Harbour Energy is pleased to provide funding for this acquisition and to continue our active support of Chrysaor in pursuit of its goal to deliver material growth and value.”