TIDMPMG
RNS Number : 1911D
Parkmead Group (The) PLC
19 June 2023
19 June 2023
The Parkmead Group plc
("Parkmead", the "Group" or the "Company")
UK North Sea Strategy Update
Parkmead, the independent energy group with operations in the
Netherlands and the UK, provides the following update on its
strategy in relation to its UKCS licence interests.
Strategic Direction
The UK North Sea upstream industry is facing unprecedented
challenges associated with volatile oil and gas prices, ageing
infrastructure and rising capital and operating costs. This,
combined with the sharp increases in taxation in the last 12 months
and the loss of key equipment and human resources from the UK North
Sea, has resulted in a large number of drilling campaigns and
investment decisions on new field developments being delayed,
curtailed or cancelled. A further major consideration has been the
significant increase in the cost of capital made more difficult by
a lack of appetite from traditional funding sources to support oil
and gas projects. These factors are affecting all companies active
on the UKCS, from major multi-nationals to independents.
Parkmead, like many of its peer companies, has found it
necessary to re-evaluate its strategic direction and develop a
transition plan that moves the company forward during an
ever-evolving regulatory framework, which recognises the social and
economic demand for viable and sustainable clean energy.
Parkmead is an experienced British independent energy company,
with a management team that has a successful track record of
operating on the UKCS, and we remain fully committed to our home
region. However, given the unprecedented very high hurdles created
by the current challenges, the Parkmead Board has taken the
decision that it must now necessarily be very careful and selective
in its forward UK investment strategy. The Board of directors has
agreed that Parkmead's primary focus will be on building a
high-quality portfolio of gas producing assets and electricity
generation from renewable energies, that meet the ultimate aim of
net-zero. Alongside this, Parkmead will continue to work on its
existing portfolio of oil and gas assets where they have the
potential to be developed rapidly within the UK transition phase
and also evaluate acquisition opportunities that are aligned with
this strategy.
Perth Area
As announced in the interim results on 31(st) March 2023, the
Parkmead team has worked extremely hard in recent years to progress
this challenging development with its unique set of characteristics
including problems handling sour gas combined with ageing nearby
infrastructure. This work has included extensive transportation,
engineering and processing studies and commercial negotiations with
infrastructure owners including INEOS and the Scott Area owners.
Latterly, Parkmead was encouraged with the positive initial
findings from a Net-Zero feasibility study, conducted in
conjunction with CNOOC and Worley, which demonstrated that a
technical solution was possible using the Scott platform for the
reinjection of associated sour gas into a nearby depleted
reservoir. However, recently updated development capital costs for
Perth, including the additional costs of achieving net-zero
requirements, have climbed to almost one billion US dollars.
These studies resulted in a technically sound, Central North Sea
development which could have added significant oil volumes for the
UK albeit through ultra late-life neighboring infrastructure. This
development plan could therefore satisfy both MER and Security of
Supply Central Obligations for the NSTA. In addition to the
comprehensive geoscience and technical work completed, Parkmead has
been having detailed discussions with a number of companies active
nearby and the NSTA around extending the licences to give the
necessary time for submission of a revised concept select report
following completion of the net-zero studies. Concurrently,
Parkmead and its advisers, ran a comprehensive farm out process, as
previously announced in July 2022. This process ran over several
months and farm-in interest was expressed from multiple parties,
subject to an extension to the current licence and other
factors.
However, significant concerns were highlighted over the
longevity of potential nearby host infrastructure, the inability to
pursue a stand-alone FPSO development option under the net-zero
requirements and, in particular, industry concerns were highlighted
over the recent numerous fiscal changes which has led to a large
increase in effective taxation. Such an increase materially damages
project economics, undermining the usual risk-reward equation
associated with making major offshore oil and gas field investment
decisions. These factors, combined with a lack of public and
political support for new oil projects, have resulted in a very
cautious and conditional approach from industry during these
partnering discussions. Throughout this in-depth and extensive
process, it has become clear that without full and committed
engagement from industrial partners it would not be practical to
progress the Perth development to FID, particularly recognising the
massive level of capital investment required.
The Company therefore advises that the potential Perth oil
development will not be pursued and that the P588 and P2154
licences containing the Perth discovery are not being extended. A
non-cash one-off impairment of approximately GBP33m relating to the
Perth area will be recorded in the accounts to 30 June 2023.
Parkmead remains in a very healthy cash position with ongoing
valuable revenues from our producing Dutch gas fields and onshore
UK wind turbines. Additionally, the Group has a very significant
pool of UK tax losses, which total in excess of GBP150 million.
This tax position means Parkmead is exceptionally well placed in
respect of making potential acquisitions, at a time when UK oil and
gas taxation for larger producers is at such high levels. Our
experienced management team will continue to maintain strict
financial discipline across the Group's portfolio. Therefore, we
are refocusing our offshore UK efforts on acquisitions and also on
attractive projects such as Skerryvore, which are simpler and lower
cost than Perth and so present clear opportunities for near-term
value creation for shareholders.
Skerryvore
In the UK Central North Sea, Skerryvore is an exciting area
which, despite the new fiscal and regulatory challenges, could be
developed in a timely and cost-efficient manner. Parkmead is
therefore planning to drill this high-impact well as soon as
possible. As the Operator, with a 50% stake, Parkmead is making
excellent progress with well planning and vessels and rig tendering
with a current forecasted spud date during Q4 2024. Parkmead has
two strong industry partners at Skerryvore, in Serica and
CalEnergy.
The well is targeting an estimated 157 million barrels of oil
equivalent from multiple horizons on the flank of a salt diapir.
Skerryvore is surrounded by modern infrastructure which provides
the opportunity for a number of low-cost tie-back options which, in
the success case, would allow a highly economic development of
Skerryvore to proceed at pace.
Exploration and Appraisal Activities
Parkmead is committed to pursuing attractive exploration and
appraisal opportunities where these have the ability to be drilled
and developed swiftly within the transition period, by utilising
existing nearby infrastructure with a lengthy remaining field life
that meets the requirement of net-zero targets. This revised
strategy has formed the basis of the selective applications
Parkmead has made in the UKCS 33(rd) Offshore Oil & Gas
Licensing Round. Parkmead has recently made presentations to the
NSTA on our proposed work programmes in support of these
applications, the outcome of which will be known later in 2023.
Acquisition Opportunities
Alongside our commitment to extract the maximum value from our
UKCS exploration, appraisal and development assets, Parkmead still
sees considerable upside value in UKCS production at a time when
many companies have announced their intention to withdraw or reduce
their activity levels. Parkmead's team continues to evaluate a
number of acquisition opportunities, to complement the potential of
projects within its existing asset portfolio in the Netherlands and
the UK. The focus of the Board's acquisition criteria is to seek to
add value to shareholders through revenue generation and through
the utilisation of Parkmead's significant UK tax losses.
Tom Cross, Executive Chairman, commented:
"Parkmead has developed a clear strategy for its future in the
UK North Sea. Over recent years a great deal of our team's effort
has been directed at trying to unlock the complex Perth area. Our
team is naturally disappointed that despite these huge efforts,
working closely with neighbouring operating companies and highly
skilled supply chain companies, the combination of challenging
factors means it is not economically viable to take the project
forward. However, our expert resources will now be focused on other
valuable opportunities.
As a balanced energy company, Parkmead will continue to progress
its diverse portfolio of gas, oil and renewable energy assets in
order to maximise shareholder value. We have sound and sustainable
revenue from our Dutch gas fields, plus income and increasing
potential from our growing renewables portfolio. This solid base
onshore in the Netherlands and the UK puts Parkmead in a strong
position to pursue the exciting and significant upside offshore
that Skerryvore presents in the near-term, and the Fynn Beauly and
Fynn Andrew assets in the medium-term, together with any new
licences that may be awarded to Parkmead and its partners following
its applications in the current 33(rd) UK Offshore Licensing
Round."
Enquiries:
The Parkmead Group plc +44 (0) 1224 622200
Tom Cross (Executive Chairman)
A ndrew Smith (Business Development
Director)
Henry Steward (Group Commercial
Manager)
finnCap Ltd (NOMAD and Broker
to Parkmead) +44 (0) 20 7220 0500
Marc Milmo / Seamus Fricker
- Corporate Finance
Andrew Burdis / Barney Hayward-
ECM
About Parkmead
The Parkmead Group is a UK and Netherlands focused independent
energy group listed on AIM of the London Stock Exchange (AIM: PMG).
The Group produces natural gas from a portfolio of four fields
across the Netherlands and holds significant additional oil and gas
interests across the UK and Dutch sectors. Parkmead also 100% owns
and operates the Kempstone Hill wind energy company, producing
electricity direct to the UK grid. This is in addition to a range
of complementary renewable energy opportunities throughout the
Group.
For further information please refer to Parkmead's website at
www.parkmeadgroup.com
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