20 October 2011
Petrofac Announces IES Agreement in the North Sea
Petrofac, the international oil & gas facilities service provider, is pleased to announce that its Integrated Energy Services division has signed an agreement that will see the deployment of the floating production facility FPF1 (‘the FPF1’) on the Greater Stella Area development in the North Sea.
Petrofac has agreed to sell 80% of the share capital in the company holding the FPF1 (the ‘FPF1 Company’) to Ithaca Energy Inc (‘Ithaca’), and Dyas BV. As at the date of sale the FPF1 has a book value of US$43 million.
Under the terms of sale and purchase agreements, subject to relevant consents, Petrofac will acquire a 20% interest, from the other co-venturers in the Ithaca operated Greater Stella Area development, covering the Stella and Harrier, Hurricane and Helios discoveries. The equity position will be established through an earn-in type arrangement in Stella and Harrier which is effected at first oil, expected in the second half of 2013, and the transfer of an interest in Hurricane and Helios.
Petrofac’s Offshore Engineering & Operations business will carry out modification and upgrade works to the FPF1 ahead of its deployment on the Greater Stella Area development. Petrofac will subsequently provide Duty Holder services to the FPF1 on a life of field contract. In accordance with its standard accounting policy, Petrofac will book the initial five years' of estimated contract revenues into backlog in relation to the upgrade and Duty Holder contracts, which equates to US$540 million.
The Stella and Harrier fields will be developed via subsea tieback to the FPF1. First oil from the hub is forecast at an initial annualised average rate of 30,000 barrels of oil equivalent per day. In addition, the Hurricane discovery is to be further appraised in Q1 2012 with commerciality determined in Q2 2012. Helios is an early stage discovery with a ‘drill or drop’ decision planned for 2013.
The FPF1 Company has an option to require Petrofac to acquire the upgraded FPF1 on cessation of production, the price for the first five years being US$127 million, declining in value thereafter.
Andy Inglis, chief executive of Petrofac’s Integrated Energy Services division, commented: “I am delighted to announce the deployment of the FPF1 as a further step in the delivery of Petrofac’s Integrated Energy Services strategy. With this agreement Petrofac will provide both the upgrade and the Duty Holder services for the FPF1. The equity position and associated capital investment (including Petrofac’s share of the associated facilities and of the modification and upgrade costs of the FPF1) of approximately US$200 million in the Greater Stella Area creates alignment with our partners. It also provides Petrofac with access to resource upside and a new production hub with the potential for additional third party tie backs. We look forward to establishing a long and successful relationship with Ithaca and its partners on this development.”
Iain McKendrick, chief executive officer of Ithaca, commented:
“Petrofac is a world class provider of engineering and operational services with a reputation for delivering value in the North Sea and I am delighted to be welcoming the company into the heart of the Greater Stella Area development, not only as a provider of key services during the execution phase of the project, but also as a co-venturer within each of the Greater Stella Area fields.”