North Sea dealmaker Andrew Austin to buy stake in UK gasfields

Oil and gas entrepreneur Andrew Austin is making waves in the UK North Sea again after agreeing a $125m-plus deal for a 20 per cent stake in a group of gas-producing fields north-west of the Shetland Islands.

The acquisition from French oil major TotalEnergies of a minority interest in four fields that make up the “Greater Laggan Area” will be made via Kistos, which Austin listed in London in 2020 months after he sold his previous North Sea company RockRose Energy for £248m.

Austin, a former investment banker and also one of the founders of the UK onshore oil and gas producer IGas Energy, made an estimated £66m from the sale of RockRose to Viaro Energy in 2020.

The acquisition by Kistos, announced on Monday, covers a 20 per cent stake in the Laggan, Tormore, Edradour and Glenlivet fields and their associated infrastructure, which are located about 125km north-west of the Shetland Islands and have been in production since 2016 and 2017.

It also includes holdings in exploration and other projects, including a 20 per cent stake in the yet to be developed Glendronach gasfield discovered west of Shetland in 2018.

Kistos said it expected production from the interests it is acquiring to average about 6,000 barrels of oil equivalent per day in 2022.

The company will initially pay $125m in cash but the transaction, which is subject to UK regulatory approval, also includes further payments including up to $40m in 2023 if average UK day-ahead gas prices exceed 150p per therm this year.

The deal is the second acquisition made by Kistos since it floated at 100p per share in November 2020 but is its first in UK waters. Its previous deal was for producing assets in the Netherlands.

Austin told the Financial Times that Kistos was focused on buying gas rather than oil assets because the former would “remain important” in the transition away from fossil fuels.

“The geopolitical situation in the world emphasises that the value of gas close to home is going to remain well underpinned,” he said, referring to high global gas prices as tensions between Russia and Ukraine mount.

There is still appetite among some smaller companies and private equity-backed groups for fossil fuel assets in UK waters.

This is despite recent calls by opposition British politicians for a windfall tax on gas producers, and rising controversy around continued oil and gas extraction as the country strives to meet a 2050 net zero greenhouse gas emissions target.

Austin said a windfall tax would not be “wise” as it would stifle investment in domestic projects. The UK already imports more than half of its gas needs.

“Part of the reason we’re in the position we are in, with gas prices at the level [they] are, is because there’s been a lack of investment. If we suddenly end up increasing taxation on companies, people are even less likely to invest and the chances of the price going up increases again,” he added.

Oil majors and large utilities have been reducing their exposure to the North Sea since the 2004 oil price crash, although several remain influential in the region. After completion of the deal to Kistos, Total will retain a 40 per cent holding in the Laggan, Tormore, Glenlivet, Edradour and Glendronach fields.

The French major was the biggest UK gas producer in 2020, according to data from Rystad Energy.

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