Antin Buys North Sea ETS Asset (Update 2)

(Updates with comment on further stake acquisitions, para 3)

Antin subsidiary Cats Management (CML) has entered into three sale and purchase agreements with Premier Oil (30%), Centrica (25%) and Perenco (10%) for their stakes in the Esmond Transportation System (ETS), a UK North Sea pipeline network, it said December 12. 

On completion of the acquisitions, CML will become the operator of ETS and will maintain the existing arrangement whereby Perenco operates the pipeline on its behalf in its capacity as operator of the Trent platform.

The remaining shares belong to French Engie (25%) and ConocoPhillips (10%), and CML is not planning to buy these as well. CEO Andy Hessell told NGW: “In line with our strategy to grow our business in the North Sea, we routinely screen midstream infrastructure investment opportunities across the region, and will continue to do so. At this stage, no further investment is planned in ETS.”

UK producer Premier Oil said December 11 it would receive up to £23.6mn ($31.6mn) for its stake in cash, consisting of £21mn upfront, plus a future potential payment of up to £2.6mn in respect of any future development of the Pegasus gas field – and will use the proceeds to pay down its existing debt. Effective date of the ETS sale is January 1 2017. Premier expects the sale to complete in 1H 2018.

The ETS pipeline was built to transport gas from Esmond Area fields to the Bacton gas terminal in Norfolk, eastern England. The pipeline is operated by Perenco, which also operates the Trent and Tyne gas fields, and is the export route for the Cygnus gas field recently brought on stream by Engie E&P, a company soon to be controlled by independent Neptune Energy.

Premier CEO Tony Durrant said: “The sale of the ETS pipeline interest is another step in realising value from the E.ON UK portfolio acquired by Premier for $120mn in 2016. The ETS pipeline does not serve any fields owned by Premier and is therefore non-core to the group.”

Antin paid BG Group £562mn ($954mn) in 2014 for BG's 63% stake in the larger Central Area Transmission System (Cats), while BP sold its remaining Cats stake to Antin in 2015 for £324mn ($486 mn), with ship-or-pay contracts guaranteeing a revenue stream for the buyer.

Hessell said December 12: “We are delighted to have reached agreement on ETS. Growing our business in the Southern North Sea allows us to diversify our asset portfolio through exposure to an entirely new catchment area with different business dynamics, and to acquire infrastructure that has the characteristics we value.

“Investment in both established and new infrastructure is key to maximising economic recovery and realising the considerable potential of the UK Continental Shelf. We look forward to continuing to collaborate closely with our partners and customers to facilitate and encourage further investment which will support the long-term sustainability of the North Sea.”

CML said the ETS acquisitions were further progress towards CML expanding its midstream infrastructure business in the UK. Earlier this year CML also signed heads of terms with Premier Oil and Dana Petroleum to enter into an infrastructure partnership to support the development of the Tolmount field in the southern gas basin and one of the UK's largest undeveloped gas fields.

Under the terms of the deal, CML and Dana will jointly construct and own the Humber Gathering System (HGS), consisting of a platform and export pipeline, in equal shares, with CML assuming operatorship. CML and Dana will also jointly undertake the onshore modifications at the Dimlington terminal in East Yorkshire, that are required to enable gas from HGS to be received and processed. 

The ETS and HGS investments fit with CML’s vision of being recognised as the leading midstream infrastructure business in the UK, and are aligned with its business model of investing in critical long-life midstream infrastructure, running it safely and efficiently and seeking to encourage and incentivise further upstream developments, it said. 

They also support the industry’s drive to maximise economic recovery. ETS supports the delivery of gas from the Cygnus field to market, where there is scope for growth from the greater Cygnus area and beyond. The Greater Tolmount Area has significant follow-on potential, CML said.