Shell PLC (LSE:SHEL, NYSE:SHEL) has again increased its footprint in the UK North Sea by taking control of the Victory discovery, a ‘development ready’ project in the West of Shetland region.
It was confirmed by AIM-quoted Reabold Resources PLC (AIM:RBD), in a statement this afternoon, that Shell was the previously un-named buyer in its £32mln deal to sell Corallian Energy (a vehicle part-owned by Reabold) which held the Victory project.
Victory is the latest in a string of new UK gas projects undertaken by Shell including the Jackdaw development, greenlit in July, and a number of exploration ventures designed to unlock new domestic supplies into Britain.
Shell earlier this year pledged to invest £20bn to £25bn in ‘the UK energy system’ over the next decade and, according to sector experts, investment appetite across the industry has been boosted further by tax incentives that were bolstered in parallel with the government’s Energy Profits Levy (the windfall tax) – which allows some 91p per pound invested to be claimed as relief.
A prior study of the Victory field estimated the project hosted some 179bn cubic feet of gas of ‘technically recoverable resources’.
At 50p per therm (the historical benchmark used in the report’s estimate), those resources were valued at £193mln. For present-day context, the UK natural gas price was 300p per therm in October, having reached up to 640p in August.
Victory is located some 48 kilometres from the north-west of the Shetland Isles, in a water depth of 158 metres. It has been described as a “relatively simple” tie-back gas development into the existing Laggan-Tormore pipeline which is in turn connected to facilities near Sullom Voe in the Shetland Islands.
Reabold, which owns a 49.99% interest in Corallian, is set to see £3.2mln net from an initial £10mln gross payment during the fourth quarter.
It intends to reinvest proceeds in its own UK oil and gas ventures, including the West Newton project onshore, near Hull, and its other earlier-stage North Sea exploration interests.
"We are very pleased that Shell has acquired Corallian, and therefore the Victory asset,” said Reabold co-chief executive Stephen Williams.
“We believe such a transaction validates Reabold's strategy of creating value for shareholders by identifying, funding and monetising underappreciated, strategically important assets.
“The net proceeds to be received will provide Reabold with improved financial flexibility to consider further acquisition opportunities and develop its existing assets. In addition, we believe this transaction will result in the production of indigenous natural gas resources that will enhance the UK's energy security position."
Reabold first announced its expected divestment of the Victory project, via the sale of Corallian, in September.
Later, a week ago, it was separately announced that Reabold had agreed a low transaction cost acquisition of Simwell Resources Limited, a company which holds interests in four North Sea licences, including one operated by Shell.
This project is located next door to Shell’s imminent drilling of the Pensacola exploration well, where it is partnered by another AIM-quoted explorer, Deltic Energy PLC (AIM:DELT).
Last week, Reabold also announced the findings of a study into the West Newton project which the company believes to be “potentially one of the largest hydrocarbon fields discovered onshore UK”.
Consultant RPS Energy, in its report, valued the gas project in Yorkshire at some US$396mln (US$222mln net for Reabold’s 56% economic interest).
RPS ascribed some 197.6bn cubic feet (bcf) of gross 2C unrisked technically recoverable resources for West Newton’s Kirkham Abbey formation and estimated that it has an 85.5% geological chance of success.