Verus Boosts Production through Acquisitions

Tuesday, December 11, 2018

Verus Petroleum reports it boosted production from 1,500 to 18,000 barrels per day – a 12-fold increase in its production – in less than a year, through drilling and key acquisitions in the U.K. Continental Shelf.

The private equity backed independent operator has recently completed three significant acquisitions, including an interest in the Babbage gas field acquired from Premier Oil on December 6, on the back of completing transactions to acquire Cieco Exploration & Production (UK) Limited and Equinor’s Alba field interest in November.

The three deals, each with an economic date of January 1, 2018, were funded by a combination of equity from Verus majority-owner HitecVision, existing cash reserves and debt.

The most recent acquisition includes a 47 percent interest in the Babbage gas field from Premier Oil for a consideration of £45.9 million ($57.9 million). As part of this transaction, Verus will also acquire a 50 percent interest in Licence P.2212, where a well is planned in 2019 to prove additional gas volumes which could be tied back to Babbage some 10 kilometers away.

Verus acquired from Cieco Exploration & Production (UK) Limited, a wholly owned subsidiary of ITOCHU Corporation, a 23.1 percent interest in the Western Isles Development Project, a 25.8 percent interest in the Hudson field, a 2 percent interest in the Brent Pipeline System and a 1.2 percent interest in the Sullom Voe oil terminal for a consideration of $400 million.

Verus also picked up a 17 percent non-operated interest in the Alba oil field from Equinor, who will retain its liability for the decommissioning cost of the existing Alba facilities.

Together with the drilling of two wells on the Boa field, the acquisitions add approximately 17,000 barrels of oil equivalent (boe) to Verus’s daily production, materially increasing Verus’s cash flow.

Alan Curran, chief executive of Verus Petroleum, said the transactions align with the company’s strategy to expand its production base and cash flow through the acquisition of high-quality production assets.

“Long-term, our aim is to build a full-cycle E&P company of scale. We now have a diversified portfolio of high-value barrels with low lifting costs in predominantly long-life fields with very strong cash generation, giving us the platform to achieve that aim,” Curran said.

“Our acquisition in the Boa oil field in 2017 announced our arrival; the completion of these three deals – within a matter of months – is a strong show of our resolve to become one of the leading independents in the basin.”

Curran added that the business aims to secure operatorship of assets in the short-to-medium term. “HitecVision’s continued support provides Verus with a solid capital base. This is a robust foundation for further growth. We are now looking to reinvest the cash flow from these assets in further long-life production and development opportunities,” he said.

On November 14, Verus signed an amended and restated Reserves Based Lending Facility (RBL) with its existing lead Nedbank Limited and six new banks to the facility. The new banks are DNB Bank ASA, Lloyds Bank plc, BMO Capital Markets, Commonwealth Bank of Australia, Skandinaviska Enskilda Banken AB and Royal Bank of Scotland plc. All are internationally recognized in the RBL market.

The RBL has been increased to $500 million and, with the strong support received from the banks and HitecVision, the company has access to material funds to finance acquisitions beyond those already announced.

Categories: Mergers & Acquisitions Activity Europe Production

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