The independent Aberdeen oil company headed by Scots oil tycoon Ian Suttie has gone bust after virtually ‘giving away’ its stake in the massive Kraken oil field to rival explorer Cairn Energy.
The company – First Oil and Gas – called in receivers KPMG on Friday (19 Feb) after being left stranded by the collapse in N. Sea crude oil prices, which have slumped by 70% in Spring 2014 to around $33-barrel today.
In 2015 First Oil carried out a strategic review of its operations following the sharp falls in the oil price which have dominated the sector over the past year. In late 2015 the Group commenced a sale process for the business and its constituent parts.
Prior to the appointment of the joint administrators, First Oil sold its interest in the Kraken oil field, east of Shetland, to the other joint operating partners of the field. The Kraken Area is due to commence production by the end of this year.
Edinburgh-based Cairn Energy acquired an additional 4.5% interest in the Kraken development in the UK North Sea from First Oil plc, bringing its total working interest to 29.5%.
Cairn and EnQuest PLC, the operator of the Kraken development, are both taking up First Oil’s interests pro-rata to their holdings prior to the transaction. EnQuest’s interests will increase to 70.5% following the transaction.
There is a nominal cash consideration payable in respect of the transaction however Cairn will waive its right to reclaim approximately US$3m of cash calls paid on behalf of First Oil in January and February 2016.
Shortly after their appointment, the joint administrators executed a conditional sale agreement with Zennor Petroleum Limited for the sale of Expro’s interest in a number of assets including two subsidiary companies, First Oil and Gas Limited (“FOGL”) and Antrim Resources NI Limited (“ARNIL”).
These two companies remain outside of administration and, once certain formalities have been completed over the next two weeks, will then be wholly owned by Zennor.
The conditional sale agreement provides for the transfer of First Oil’s interest in the following North Sea producing fields: Mungo & Monan, Bacchus, Cormorant East and Causeway – in addition to the undeveloped discoveries Glenn and Platypus.
Prior to the appointment of the joint administrators, First Oil sold its interest in the Kraken oil field to the other joint operating partners of the field.
The joint administrators are in discussions to resolve the position on First Oil’s remaining assets.
Jim Tucker, joint administrator and restructuring partner at KPMG, said: “We are delighted to announce these two company sales today, which are an excellent outcome for stakeholders.
“The fact that their owner, First Oil Expro Limited, sold them via an administration process is a reflection of the significant challenges facing UK North Sea oil and gas companies in the current oil price environment.
“These sales will ensure that the company’s four largest field interests are smoothly transferred to new ownership, and provide time to resolve the position concerning the smaller assets in the group’s portfolio.”
Accountant-turned-tycoon Suttie made his personal fortune when he sold the Orwell Group to a US international oil services company in 2001.