TotalEnergies farms down UK interests for $125mn

TotalEnergies has reached a conditional deal to sell a 20% interest in the Greater Laggan Area (GLA) west of the Shetland Islands along with interests in other exploration licences to London-listed Kistos for at least $125mn, the latter said on January 31.

Kistos, formed in 2020 by RockRose Energy founder Andrew Austin, confirmed in late December it was vying for the TotalEnergies assets, which include 20% stakes in the producing Laggan, Tormore, Edradour and Glenlivet fields, as well as in the undeveloped Glendronach gas field, in the GLA zone. Kistos is also set to pick up a 25% stake in block 206/4a, containing the 638bn-ft³ Benriach prospect.

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Kistos expects to net 6,000 barrels of oil equivalent/day from the acquisition, which will be backdated to January 1. It will pay TotalEnergies an initial $125mn, and up to $40mn in January 2023 if average day-ahead gas prices at the UK's National Balancing Point exceed £1.5 ($2)/therm. If Benriach is developed, Kistos will also pay out $0.25/mn Btu for net 2P reserves after first gas.

"On completion, we will have a solid foothold in both the UK and the Netherlands from which we can continue to implement our growth strategy," Austin said in a statement. "We expect the acquisition to increase the company's 2P reserves by 6.2mn boe and effectively double our end-2021 production rate to 13,500 boe/d on a proforma basis."

Kistos acquired a package of gas assets off the coast of the Netherlands from local producer Tulip Oil last year for an initial sum of €220mn ($263mn). Those assets had a very low CO₂ footprint of only 10 g of CO₂ equivalent/boe. The UK fields it is buying into are also very low-carbon, with a Scope-1 emissions intensity of 13 g, versus an average of 22 kg of CO₂/boe for UK offshore gas production.

The GLA fields lie in waters 300-625 m deep, up to 125 km northwest of the Shetland Islands. First gas at the Laggan and Tormore fields was achieved in 2016, while the Glenlivet and Edradour fields were brought on stream the following year. TotalEnergies discovered Glendronach in 2018, and expects to develop the field using existing infrastructure.

TotalEnergies will retain a 40% position in the GLA fields after the sale is completed. Ineos and SSE each hold 20% stakes in the area.