Spirit Energy’s boss said yesterday that the firm’s swoop for stakes in two North Sea licences would make it “more attractive” to potential new joint venture (JV) partners.
Chief executive Chris Cox said the biggest barrier to turning Spirit into a more sustainable business was a lack of reserves.
The company will acquire 50% of Hurricane Energy’s Lincoln and Warwick licences, west of Shetland.
Spirit will initially fund a £139 million campaign to drill three wells in the Greater Warwick Area (GWA), starting in the first quarter of 2019.
The Transocean Leader rig has been booked for the job.
One of the wells will be tied back to the Aoka Mizu floating production vessel ahead of first oil in 2020.
A final investment decision on a full field development is slated for 2021.
Spirit will become licence operator following successful drilling in 2019-20.
The Lincoln discovery and Warwick exploration prospect are thought to contain contingent resources of more than 600 million barrels of oil equivalent (mmboe).
Spirit had proven and probable (2P) reserves of 363 mmboe and contingent resources of 168 mmboe at the end of last year.
The business launched in December 2017 and is a JV made up of Centrica’s exploration and production business and Bayerngas Norge.
Centrica has a 69% stake in the venture and Bayerngas Norge’s former shareholders, led by Stadtwerke München Group, hold 31%.
Mr Cox said early in 2018 that Spirit was seeking new partners and a month later Centrica announced it was prepared to drop its stake below 50%.
“This deal makes Spirit more attractive to other companies who might consider joining our joint venture, so we are on the lookout for other deals,” Mr Cox said yesterday.
He said some companies were “snaffling” up expensive reserves and that Spirit would not try to compete in that market.
Mr Cox also said Spirit pumps out about 50 million barrels of oil per year and did not need to “buy new production”.
Furthermore, he said Spirit’s ability to “move quickly” meant the company was “exactly the sort of partner” Hurricane wanted.
Mr Cox said the deal had been put together relatively quickly, adding: The feedback from Hurricane was that we are exactly the sort of partner they want, because we can move quickly and are able to fund various phases out of our cash flow.
“And we’re like minded about how we see this unfolding. We want to develop this quite quickly.
“When we look at west of Shetland, some plans have around an awful long time and have not got to project sanction.
“We sensed Hurricane did not want to be in a situation where the pace was dictated by a company with other priorities around the world.
“They know this is key to the development of Spirit and will get our attention.”