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Delek's Ithaca buys Chevron UK North Sea assets for $2 billion

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Delek's Ithaca buys Chevron UK North Sea assets for $2 billion

London — Delek-backed Ithaca Energy has agreed to acquire Chevron's UK oil and gas asset portfolio in the central North Sea for $2 billion, it announced Thursday, as the Israeli company looks to develop as an international upstream operator.

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Under the deal, Ithaca will add 10 producing field interests to its existing assets, boosting its proven and probable reserves by 150% to 225 million boe. The acquisition will also support a quadrupling in Ithaca's forecast 2019 production to 80,000 boe/d, of which 60% is liquids, at an operating cost of about $17/boe, the company said.

"The acquisition is a key part of the Delek Group's strategic focus on building a world class E&P business," Delek CEO Asi Bartfeld said in a statement.

Ithaca, which operates the Stella Area hub, produced 16,000 b/d of oil equivalent last year and expects a slight increase this year, to 20,000 boe/d, driven by infill drilling and other work, before a boost in 2020, when the BP-operated Vorlich field is due to start producing.

Chevron's UK North Sea assets include stakes in the Alba, Alder, Britannia (and satellites), Captain, Elgin/Franklin, Erskine, and Jade fields.

Four of Chevron's assets are already operated by the company, Ithaca said, adding that some 500 employees will transfer to the company, of which around 200 work offshore on the operated assets.

The sale reduces Chevron's UK assets to just its 19% stake in the Clair field West of Shetland, making a complete exit from the UK "looking increasingly likely," energy analysts Wood Mackenzie said Thursday.

"Chevron has a deep portfolio of high-return tight-oil opportunities through its leading position in the Permian basin -- this sets a very high bar in the internal competition for capital within Chevron's portfolio, making regions such as the UK now look more peripheral," Wood Mac said.

The transaction has an effective date of January 1, 2019 and is expected to complete around the end of the third quarter of 2019 following approval of the acquisition by the UK Oil and Gas Authority.

-- Robert Perkins, robert.perkins@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com