Atlantic Petroleum sells Pegasus West stake in deal worth up to £16.5 million

By Amy McLellan

Atlantic Petroleum, which is listed in Copenhagen and Oslo, has sold off its 10 per cent stake in three North Sea licences, including the Pegasus West gas discovery, for up to £16.5 million.

The deal has been agreed with Third Energy Offshore, a privately-owned company based in Yorkshire, which will pay £7.5 million on completion and the remainder will be conditional on production from Pegasus West and further development on the blocks, which are operated by Centrica.

The Pegasus West well (43/13b-7) was drilled and tested at a combined rate of 91 million cubic feet per day in late 2014. It lies about seven kilometres from the Pegasus North discovery well; both wells are close to the producing Cavendish Field.

The licences are operated by Centrica North Sea Gas which holds 55 perf cent equity. Atlantic Petroleum holds 10 per cent equity and the remaining equity 35% is held by Third Energy Offshore.

Atlantic Petroleum CEO Ben Arabo said the sale of the Pegasus discoveries and surrounding acreage was part of a strategy to realise value at an early stage from exploration successes.

“The proceeds from the sale will be used to strengthen our balance sheet during the current period of low oil prices,” said Arabo, who said the price “clearly demonstrates” the value of the exploration portfolio.

Rasik Valand, chief executive of Third Energy, said the Pegasus area was “an extremely promising development”.

“Third Energy is of the view that the separate pools of gas that comprise the Greater Pegasus structure and additional undeveloped near-by discoveries could ultimately lead to the development of a major new gathering hub in this part of the Southern North Sea,” said Valand.

“This transaction is the latest step in our strategy of building a successful British gas exploration and production business and building our offshore portfolio,” he added.

It comes as the Tórshavn, Faroe Islands-based company tackles the impact of low oil prices: in April it pumped around 1,800 boepd from the Chestnut, Ettrick and Blackbird fields in the UK North Sea, a tally that will be down this month due to a planned shut down on the Hummingbird FPSO for annual maintenance.

Inevitably the lower oil price environment has impacted revenues, forcing the company to reign in exploration spending.

Even so, some exploration wells continue, most notably in Norway where exploration spend in partly under-written by generous tax rebates: the company recently participated in the drilling of exploration well 6706/12-3 on the Roald Rygg prospect, some 12 km west of the giant Aasta Hansteen field in the northern part of the Norwegian Sea.

The well found a total gas column of c 38 metres in the Nise Formation but the Kvitnos Formation was water-bearing at this location althought the sandstones were of good reservoir quality.

The preliminary volume estimates on the find are around 70-250 BCF, in line with Atlantic Petroleum’s pre-drill estimates. Atlantic Petroleum, which has other discoveries and prospects in this area, has a 7.5 per cent stake in the Statoil-operated project, which is a candidate for a tie-back to Aasta Hansteen.