London — UK independent EnQuest said it would buy the rest of BP's stakes in the North Sea Magnus field and the strategic Sullom Voe terminal in the Shetland Islands.
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EnQuest said Friday it had introduced efficiencies and cut costs at Sullom Voe, which handles almost 100,000 b/d of Brent crude from the UK's northern-most fields, since buying its initial 3% stake last year.
The handover of operations at Sullom Voe from BP last year was part of a wider sale of assets by the UK major that included offloading the Forties pipeline to Switzerland-based Ineos.
EnQuest's business model focuses on extending the life of aging assets, and the industry now argues such assets are better handled by small, dedicated players.
Sullom Voe is owned by a consortium of more than a dozen companies, but EnQuest will now be fully responsible for operations.
EnQuest said it expected to cut the cost of operating the terminal this year by 25% to GBP150 million ($194 million), as it raises its stake to 15.1%.
At the Magnus field, which produced 13,400 b/d of oil last year according to data from the regulator, EnQuest said it had added production from a new well in May and would soon bring on stream another.
It said efforts to improve efficiency and increase water injection were succeeding, with "high levels of uptime in the first half of 2018." Under Friday's announcement, EnQuest increases its stake in Magnus from 25% to 100%, as well as gaining other related infrastructure.
"Our view of Magnus as a high-quality asset has been enhanced since acquiring our initial 25% interest," EnQuest CEO Amjad Bseisu said in a statement. "The option is on attractive economic terms and upon completion our increased ownership will provide the group with an immediate and material increase to the Group's existing 2P reserves and annual production."
Investors, however, were disappointed that the $300 million deal to buy BP's remaining stakes in Magnus and Sullom Voe is being funded partly through a $138 million rights issue, diluting shareholder value. EnQuest's shares took a battering on the London Stock Exchange.
It reported only modest progress improving its debt position, reducing its net debt to $1.97 billion.
KRAKEN HEAVY OIL
EnQuest also said its Kraken ultra-heavy oil project in the North Sea has performed below expectations due to water injection problems, producing 31,000 b/d in the first half of the year. Output rose to 33,000 b/d in July and August and a fourth, slightly scaled-back drill center is expected to result in further increases.
Kraken is one of a number of projects that have stabilized North Sea oil output in recent years. UK total oil output was up 1.4% on the year in the first six months of 2018 to 1.05 million b/d.
The original target for Kraken was to reach 50,000 b/d.
Kraken is by far the heaviest crude produced in the North Sea, with an API gravity of 14, but is also of low viscosity. EnQuest reiterated that it was fetching "healthy" prices.
Overall, EnQuest produced 54,000 b/d of oil equivalent in the first half of the year, up 46% from a year earlier. Of the total, 15% was in Malaysia and the rest in the UK. It reaffirmed plans to produce 50,000-58,000 boe/d for the full year.
--Nick Coleman, nick email@example.com