THE American oil giant once hailed as the saviour of the North Sea is to quit Britain after putting all of its fields up for sale.
Apache Corporation, which is the North Sea’s third-biggest producer behind BP and Royal Dutch Shell, has hired Goldman Sachs to find a buyer. The move puts another question mark over the future of Britain’s offshore oil industry, one of the crucial issues of the Scottish independence referendum.
Apache’s exit marks a dramatic about-turn from one of the biggest investors in the North Sea. The Houston-based company has built its 70,000 barrel-a-day empire by buying mature fields from rivals, such as Exxon, and revitalising them.
Its North Sea change of heart follows pressure from activist investor Jana Partners, which wants Apache to sell most of its international assets to focus on America’s booming shale gas industry.
Goldman Sachs recently sent out a three-page “teaser” document to potential bidders. The memo, seen by The Sunday Times, highlights Apache’s star reservoirs including Forties, the biggest in the North Sea, which it bought from BP in 2003, and Beryl, purchased from Exxon only three years ago.
North Sea production has fallen from its 1999 high of 4.5 million barrels a day to only 1.4 million barrels last year.
Apache was a favourite of politicians because it specialised in breathing new life into old operations, helping to keep up production levels. The company is the most active driller of new wells in the North Sea.
Rising production costs and the falling oil price have made its approach less lucrative, especially compared to America, where the shale revolution has led to a huge surge in production. The price of brent crude dropped to less than $US93 a barrel last week, the lowest in more than two years. The slide is due to increased production by Saudi Arabia and America.
The latter is now producing 22 million barrels a day of oil and gas thanks to shale drilling, which uses high-pressure water, chemicals and sand to blast apart previously untappable rock formations.
Thanks to the jump in production, America has snatched Russia’s crown as the world’s biggest producer of fossil fuels. Five years ago America had a huge oil and gas supply deficit.
Apache is not the only company looking to reduce activity in Britain. BG, Shell and Talisman Energy have all recently put legacy North Sea operations up for auction.
Industry sources said Apache may have a hard time finding a buyer. The company’s reservoirs bring with them hundreds of millions of pounds in abandonment liabilities — the future clean-up costs that any suitor would have to agree to assume.
The US producer is also looking at selling its operations in Egypt and Australia. One suggestion is that it could instead spin them off, along with the British business, into a new company that could be worth more than $US11 billion.
Apache declined to comment.
The company entered Britain in 2003 when it paid $US1.3bn for the Forties field, which was discovered in 1970 and had once produced 500,000 barrels a day. Its output had dwindled to a fraction of that but Apache turned it around.
Apache controls pipelines and platforms that serve as vital lifelines for smaller fields. It has more than 150 million barrels of proved reserves left in the ground.
The Sunday Times