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Germany’s E.ON about to sell its North Sea and Algeria assets

It’s a good thing the North Sea doesn’t have feelings, because with the exodus of explorers in the region it would have good reason to be pretty miffed right now. The latest is German energy giant E.ON.

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It’s a good thing the North Sea doesn’t have feelings, because with the exodus of explorers in the region it would have good reason to be pretty miffed right now. The latest is German energy giant E.ON.

It is hoping to raise around £1.25bn to restructure its business, having felt the pinch from the slump in oil process since this time last year.

But the North Sea ones – Huntington, Elgin, Franklin and Glenelg – aren’t going to cover all that it wants to get, so E.ON will also be auctioneering off the Algerian oil and gas assets. Russia won’t be included.

The company has instructed Bank of America Merrill Lynch to find potential buyers. Several have been given access to data on the company’s international exploration and production assets ahead of the official launch of the sale mandate. It’s thought Centrica’s former oil chief Jonathan Roger who now heads up Siccar Point Energy is in the running. Leading global private equity investment institutions KKR and Warburg Pincus are known to have been looking for opportunities in the North Sea.

The move follows E.ON’s shock announcement last year that it was going to overhaul its gigantic operation, splitting it into two: fossil fuels in one direction, nuclear and upstream in another. At the time the chief executive said the challenges of weak energy demand, low prices and Germany’s switch to wind and solar power were too large for it to “properly address”.

E.ON has not publicly commented on the launch of the sale process, only confirming through a spokesperson that “The review is ongoing and will consider the future options for the business including for example a sale of the business.”

Earlier this month Houston based Endeavour put a substantial portfolio of North Sea oil and gas assets under the auctioneer’s gravel after it entered into severe financial difficulties. 1 Derrick estimated in March that around £6bn of North Sea assets were up for sale, with groups at that time including Total, ConocoPhilips, BP and Shell working on plans to pull out. Let’s not forget the Russian billionaire Mikhail Fridman who was ordered to sell off his dozen fields in March when the UK government got anxious about what Moscow could do in the North Sea as Western sanctions continued.

A major issue lies in the difficulty finding agreement between those trying to offload for a decent sum and those looking for the smart purchase in the downtime. The sudden glut of fields means the bottom has all but completely fallen out of the market.

Add to that general concern over the state of the North Sea’s health. Only around a dozen exploration wells are expected to be drilled this year, down from 45 seven years ago and infrastructure has been scaled back.

Tony Craven Walker chief executive of Serica Energy told the Financial Times that “the industry is in a state of crisis. It is a slow death by attrition.” He sees the end of the North Sea basin coming sooner rather than later.

Let’s hope he’s wrong.
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