AIM-listed independent Longboat Energy is reviewing options to monetise or commercialise three Norwegian continental shelf (NCS) discoveries it has made over the past 12 months. The work includes examining development scenarios for each of the assets but also the potential for asset swaps or outright sales, given what the firm sees as current high demand for assets in Norway.
Since starting drilling in Q3 2021, six wells have yielded commercially recoverable hydrocarbons at Egyptian Vulture (where Longboat holds a 15pc stake), Rodhette (20pc) and Kveikje (10pc), representing an estimated 12mn bl oe of resources net to the firm. While its review process is at an early stage, Longboat “remains committed to maximising shareholder value at the earliest stage possible from its exploration success to date”.
Demand for assets on the NCS, which has significantly higher consolidation than its UK or Dutch North Sea neighbours, has seen a flurry of recent deals. In May, Oslo-listed independent Okea snapped up stakes in three fields from Germany’s Wintershall Dea, while a month before, Singapore-owned Lime Petroleum relieved Hungary’s Mol of its 40pc share in the Utsira High Iving and Evra discoveries.
The end of last month saw the completion of UK-German joint venture Spirit Energy’s NCS exit, having struck a December agreement to sell its portfolio to Norwegian independent Sval Energi—with the exception of its stake in Statfjord, which it divested instead to dominant NCS producer Equinor.
Sweden’s Lundin snapped up additional equity in the Barents Sea Wisting discovery in October 2021, a year after its acquisition of the NCS portfolio of Japan’s Idemitsu had afforded it entry into the licence. Subsequently, Lundin embarked on the largest NCS consolidation move in years by agreeing to merge its oil and gas portfolio with peer Aker BP.
New tax system
Longboat is also feeling positive about the impact of Norway’s new petroleum tax system, which it feels allows “for the expansion of existing financial structures to fund both exploration and development projects with improved economics and reduced working capital”.
It is already in discussion with its banks about a transition from an 'exploration finance facility' regime to an arrangement more fit-for-purpose for the new tax system.
The firm anticipates “significant benefit” from these restructured credit facilities to meet the working capital requirement for future development expenditure. “The new tax system gives us an additional option for realising the value of exploration success by carrying discoveries through to development as we look at all available options to progress to a full-cycle E&P company," says Longboat CEO Helge Hammer, highlighting that asset sales or dilutions are not his firm’s only options.
And it intends to stay busy. It has two “high-impact” exploration wells scheduled for the third quarter, targeting net unrisked mean resources of 44mn bl oe. Longboat expects to commence drilling at Oswig, in which it holds a 20pc stake, in July, with drilling at Copernicus (where Longboat has 10pc) due to start by the end of September. A further high-impact exploration well—Velocette (in which it has 20pc) is expected to be spudded in Q2 2023.
Oswig is close to the producing Tune and Oseberg fields in the Norwegian North Sea, to which it has tieback potential, and the well is targeting combined gross unrisked mean resources of 93mn bl oe (19mn bl oe net to Longboat). Several additional fault blocks have been identified on the PL1100 and PL1100B licences, which are estimated to contain further gross unrisked mean resources of 80mn bl oe and which would be significantly derisked by an Oswig discovery.
The Copernicus prospect lies in the Voring Basin region of the Norwegian Sea. It is estimated to contain gross mean prospective resources of 254mn bl oe (25 mn bl oe net to Longboat), with further potential upside to bring the total to 471mn bl oe. "Longboat has a sequence of significant value catalysts between now and the middle of next year with two material gas-weighted exploration wells in the coming months. The well programme continues into 2023 with Velocette and with further potential licences to be added in the [Awards in Predefined Areas] round,” says Hammer.