Europa Oil & Gas (Holdings) Plc (AIM:EOG) told investors it has chosen to prioritise its exciting new opportunity in Equatorial Guinea and opt out of a North Sea venture, which now looks less attractive.
The company, in a statement, described how the UK regulator the North Sea Transition Authority had proposed ‘a marriage’ between Europa and a third-party for a licence area that Europa had applied for in the 33rd licence round.
Europa said that it responded by letting the NSTA know that if the company was not awarded the project as the sole owner, it would decline the offer.
Moreover, the company added that various aspects of the operating conditions and the fiscal environment have changed and remain uncertain.
“This has reduced the economic and strategic attractiveness of the licence. As such, the company believes that its resources are better deployed on its existing assets and looking for new opportunities within its core areas of focus,” Europa said.
The 33rd licencing round was opened in October 2022, offering over 900 licence blocks to the oil and gas industry and it was closed for applications in January 2023.
It took until October 2023 for the first batch of licence awards to be announced, in which 24 licences were offered to companies.
In 2024, expected to be a general election year in the UK, the next batch of awards have just been announced today.
The government’s handling of the North Sea, and specifically the tax regime for the North Sea, has come under fire in recent months. Notably, the sector is subject to an effective tax rate of 75% - which Keir Starmer’s labour party threatened to raise to 78% if they take control of the country.
The fiscal regime is reportedly a factor in reduced investment and uncertainty over the sanctioning of new projects.
In parallel, ‘British’ oil majors Shell and BP have been linked with moves to exit the UK – by switching their listing to the United States, or through merger activity with American peers.
At Europa, meanwhile, the dilemma is more simple.
The company sees more significant opportunity elsewhere, and following its transaction to acquire an exciting new project in Equatorial Guinea, it now intends to prioritize that venture.
“Since making the [UK] application we have acquired an interest in the EG-08 licence in Equatorial Guinea, which we believe is very material,” chief executive Will Holland said in a statement.
“Given the size of the company and our limited resources it is essential that we focus on where we see the best risk/reward proposition that can generate significant value for our shareholders.
“Any new asset needs to be considered carefully against other opportunities that are under evaluation to ensure that we are deploying our capital on assets that have the best potential of returning value to our shareholders."