West of Shetland find in focus as gas price rise fuels interest in area
INVESTORS have underlined their interest in the West of Shetland area as the surge in oil and gas prices and the drive to reduce the UK’S reliance on imports puts a premium on domestic resources.
Finds that have lain undeveloped for years are attracting attention from firms along with exploration prospects.
The increased interest in the area was reflected in news yesterday that Corallian Energy has received a takeover offer from what has been described as a credible bidder as it plans to develop a significant find off Shetland.
News of the offer sent shares in Corallian investor Reabold Resources surging around 25 per cent. Londonlisted Reabold is also in talks to buy exploration acreage off Shetland from Corallian.
The deals that Corallian Energy is discussing come amid signs of a revival in oil and gas activity in the wider
North Sea area following a very challenging period for the industry.
Firms slashed spending on exploration and development work amid the slump that was triggered by the pandemic. However, the sharp rise in oil and gas prices fuelled by the recovery from the pandemic and the fallout from Russia’s war on Ukraine, appears to have encouraged companies to think again.
Last week West of Shetland-focused Hurricane Energy said it was in the market for acquisitions after enjoying a dramatic increase in production revenues from the Lancaster field.
Corallian is leading work on plans to develop the Victory find, which was made by Texaco in 1977.
News of the bid interest in Corallian comes around six months after directors launched a review of the firm’s strategic options in a move supported by Reabold, which has a near 50 per cent stake in the business.
When Corallian initiated the review in October Reabold said the company had made good progress on the Victory project, which it said looked highly attractive against the commodity backdrop prevailing at the time.
Oil and gas prices have risen strongly since then.
Reabold said yesterday that as part of the ongoing review Corallian had received a non-binding offer from a “credible party” for the potential sale of the business.it added: “The Corallian board of directors currently considers the offer sufficiently attractive for all shareholders to commence a sale process.”
Reabold also announced that it had agreed to acquire Corallian’s portfolio of six “attractive” exploration and appraisal licences for £250,000.
The licences covers areas off
Shetland and in the Moray Firth. They contain finds made in the 1970s and 1980s and a range of prospects. The portfolio does not include the Victory licence.
Sachin Oza, co-chief executive of Reabold, said the acquisition was potentially a very exciting transaction for the firm. He said four of the licences in particular have significant prospective potential. One contains the Oulton find off Shetland. Reabold reckons work on this could be progressed without the company incurring significant costs.
Reabold has expressed confidence that Victory could be developed relatively easily by linking it to production facilities in place West of Shetland. Total installed significant facilities to handle output from the Laggan-tormore development which it brought into production in 2016.
The interest in Corallian has provided a boost for Reabold, which had a £12m takeover approach for North Sea-focused Deltic Energy rebuffed in 2020. Directors of Deltic claimed the approach undervalued the firm. Last year Deltic sold stakes in some of its exploration acreage to the former Cairn Energy.
Reabold describes itself as an investor in high growth energy projects, in respect of which an injection of capital would facilitate near-term activity. It has a stake in the West Newton onshore gas discovery north of Hull.
Mr Oza and co-chief executive Stephen Williams previously worked for
Guinness Asset Management and M&G Investments.
Reabold Resources shares closed up 0.08p at 0.39p on the Aim market.
The board considers the offer sufficiently attractive to commence a sale process