OIL.to Two North American companies have indicated a willingness to buy all the assets of failed Canadian North Sea explorer Oilexco, writes Steven Vass.
TWO NORTH American companies have indicated a willingness to buy all the assets of failed Canadian North Sea explorer Oilexco in a deal that could raise up to £1 billion.
American companies have indicated a willingness to buy all the assets of failed Canadian North Sea explorer Oilexco in a deal that could raise up to £1 billion.
Although the companies have not been named, it raises the prospect of a bidding war when administrator Ernst & Young prepares a shortlist this month.
There had been fears bidders would only want the plum assets, complicating the sales process. The prospect of a clean sale will be seen positively by Oilexco's creditors, an RBS-led syndicate which is owed around £500 million.
Canadian giants Nexen, Petro-Canada and Talisman, together with Texas-based Apache Corporation, are all seen as likely contenders for the assets.
Anyone who pays up to £1bn is getting a good deal.
The Oilexco sale is seen as a vital test case for what North Sea assets are now worth. Oilexco controls both productive fields and promising concessions.
Its central North Sea fields produce around 12,000 barrels of oil per day and according to E&Y will soon produce 30,000. Its most valuable assets are stakes in the Huntingdon and Moth fields.
Toby Pierce, oil analyst at Tristone, said the problem with valuing Oilexco was twofold: it is unclear what will happen to the oil price, and there is uncertainty about the value of the Huntingdon field.
Al Stanton, an analyst at RBC Wealth Management, agreed that it was difficult to be accurate about the size of Huntingdon but said it was likely to be higher than some pessimists believe.
"Anyone who pays up to $1.5bn £1bn is getting a good deal," he said. "But only a small fraction of the Huntingdon field has been drilled up. You need to get your geologists in to evaluate it properly."
Stanton added that the assets appeared too big for medium-sized Scottish explorers like Dana and Venture Production.
Oilexco's market capitalisation late last week was just £26m, indicating that the markets are expecting a deal worth not much more than £500m once debts are taken into account.
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