BP to sell stakes in three North Sea fields to Serica

The Bruce platform in the North Sea
The Bruce platform in the North Sea

Oil major BP said today that it will sell its interests in three North Sea fields to Serica Energy.

The package includes the Bruce, Keith and Rhum fields, three bridge-linked platforms and associated subsea infrastructure.

Serica will pay £12.8million upfront, in addition to a share of cash flows over the next four years.

Serica will also cover 30% of BP’s post-tax decommissioning costs and make several contingent payments based on the performance of the assets and future oil prices.

Overall, BP expects to net £300million from the deal.

The sale is expected to go through in the third quarter of 2018.

About 110 BP staff members who operate and support the assets are expected to transfer with the business.

Bernard Looney, BP chief executive, upstream, said: “This is an example of BP’s upstream strategy in action – refreshing our portfolio and focusing our activity on assets which will add most value over the long-term.

“We remain committed to the North Sea and continue to invest. We expect our production there to double to around 200,000 barrels equivalent a day by 2020 through new projects like Quad 204 and Clair Ridge.

“While the Bruce assets are no longer core to BP, we are confident that Serica is the right owner and operator to maximise their continuing value for both companies and for the UK.”

Serica chairman Tony Craven Walker said: “This transaction will establish Serica as a leading British independent oil company with the scale, balance sheet and operating capability to prosper in the North Sea’s rapidly changing upstream oil and gas industry.”

Serica’s shares have been temporarily suspended on the alternative investment market in London as the acquisition is classed as a reverse takeover.

The suspension will last until an admission document has been published at the end of this month.

Serica has also appointed Mitch Flegg as its chief executive with immediate effect. Mr Flegg previously held directorships at Circle Oil.

Bruce was discovered in 1974 and started producing in 1993, with Keith tied back to Bruce in 2000. Rhum, located 25miles further north, came on stream in 2005.

Serica will take on all but 1% of BP’s 37% interest in Bruce, along with BP’s entire 34.84% interest in Keith and its 50% stake in Rhum.

BP said it would hold onto 1% of Bruce because the deal is based on staged payments that depend on the operational and financial performance of the assets.

BP also said it would retain financial liability for decommissioning the assets, but that the decommissioning activity itself would be planned and carried out by Serica.