BP announced it has agreed to sell part of its interests in the Magnus oil field and some associated pipeline infrastructure in the UK northern North Sea and in the Sullom Voe Terminal (SVT) on Shetland to EnQuest.

Included in the agreement are: 25% of BP’s 100% stake in Magnus, 25% of BP’s interests in a number of associated pipelines and a 3% interest in the Sullom Voe Terminal from BP Exploration Operating Company Limited’s (BPEOC) current total 12% stake. The sale price of $85 million is expected to be met by EnQuest from the sharing of future cash flows from the assets and the agreement will not include any upfront payment to BP.

Subject to partner, regulatory and other third party approvals, operatorship of both Magnus and SVT will transfer from BP to EnQuest on completion. The sale will not affect BP’s rights to capacity in SVT.

Under the terms of the agreement, EnQuest has an option, exercisable between 1 July 2018 and 15 January 2019, to purchase BP’s remaining 75% interest in Magnus, a further 9% interest in SVT and the remainder of BP’s interests in the associated pipelines for a consideration of $300 million. Under this option, after the recovery of consideration and adjustments, BP would also retain 50% of net cash flows from these assets, up to a limit of $1 billion. The consideration for this further acquisition would be met by EnQuest through a mixture of cash and future asset cash flows.

BP group chief executive Bob Dudley commented: “EnQuest’s experience of investing in and extending the life of mature assets in the North Sea make them a natural operator of Magnus and Sullom Voe in this later phase of their life. We believe this will enable them to prolong the life of the assets, benefiting the region and creating additional value for both EnQuest and BP shareholders. In addition to investing in and growing our core businesses, BP will continue to seek innovative opportunities such as this to work with partners to maximise value creation from our entire portfolio.”

Mark Thomas, BP North Sea Regional President said: “In recent years, we have been focusing our North Sea portfolio around core assets west of Shetland and in the central North Sea - bringing new fields into production, redeveloping and renewing existing producing facilities, acquiring new acreage and interests through licence rounds and farm-ins and selling some of our mature assets to those who see greater strategic fit with their businesses. Sullom Voe and Magnus have been great businesses for BP, but to maximise the economic life of these important assets, we believe this deal will offer them a better long-term future.

“With their integrated skills, operational scale, cost structures and high levels of operating efficiency we have seen what EnQuest can do on the Thistle, Deveron and Don fields that were previously operated by BP. We believe this is a good example of having the right assets in the right hands, offering new opportunities for the assets and benefitting the UKCS, in the spirit of Maximising Economic Recovery (‘MER UK’).”

Oil production from the BP-operated Clair field will continue to be exported through SVT, and the new Clair Ridge development will also export oil to the terminal when it comes on-stream. Gas produced from the Foinaven and Clair fields will also continue to be processed through SVT. Gas from the re-developed Schiehallion and Loyal fields will export to SVT when they are brought back into production in the coming months.

SVT and Magnus are expected to transition to EnQuest as fully operational entities, with those staff who operate and support the assets expected to transfer with the businesses. Their contractual terms and conditions are protected under UK Transfer of Undertakings (TUPE) regulations. Around 100 BP staff are currently associated with Magnus and associated infrastructure and approximately 240 with SVT. BP will now begin consultation with in scope staff.

Subject to the receipt of regulatory and other third party approvals, BP aims to complete the sale and transfer of operatorship during 2017.
Notes to editors

The deal comprises:

- The sale of 25% of BP’s 100% interest in the Magnus field, including the transfer of operatorship:
. BP will retain the remaining 75% of the Magnus field as a non-operating co-owner
- The sale of 25% of BP Exploration Operating Company Limited’s (BPEOC’s) 12% interest in SVT, including the transfer of operatorship (subject to partner and regulatory approval):
. BPEOC will retain 9% of SVT as a non-operating owner
. BP will also retain 4.4% of SVT through Britoil
- The sale of 25% of BP’s interests in associated pipeline systems:
. 9% from BP’s 36% interest in the Northern Leg Gas Pipeline (NLGP), including the transfer of operatorship
. 3.83% from BP’s 15.32% interest in the Ninian Pipeline System (NPS), including transfer of operatorship
- Production from Magnus averaged around 17,000 barrels of oil equivalent per day gross during 2016
- The sale will not impact BP’s rights to capacity in SVT
- BP is continuing to invest in its major projects west of Shetland, Clair Ridge and Quad204, both of which will bring important new oil into production
- BP is also investing significantly in the reliability and integrity of existing assets through an extensive renewal programme. It recently completed a Magnus life extension programme and is nearing completion of a £670m investment in the ETAP cluster of fields which is expected to extend its future until at least 2035
- Over the next 18 months, BP plans to participate in up to five exploration wells in the UK in addition to drilling approximately 50 development wells over the next 3-4 years
- BP was awarded 12 licence blocks across the northern and central North Sea as part of last year’s 28th licensing round and has participated strongly in the 29th round

About BP

BP (NYSE:BP) is one of the world's largest oil and gas companies, serving millions of customers every day in more than 80 countries, and employing nearly 85,000 people. BP's business segments are oil and gas exploration & production, and refining & marketing. In alternative energies, BP has low- and no-carbon wind and biofuels businesses. Through these activities, BP provides fuel for transportation; energy for heat and light; services for motorists; and petrochemicals products for plastics, textiles and food packaging. It has strong positions in many of the world's hydrocarbons basins and strong market positions in key economies.

About EnQuest

EnQuest is the largest UK independent producer in the UK North Sea. EnQuest PLC trades on both the London Stock Exchange and the NASDAQ OMX Stockholm. Its operated assets include the Thistle/Deveron, Heather/ Broom, Dons area, the Greater Kittiwake Area and Alma/Galia, also the Kraken and the Scolty/Crathes developments; EnQuest also has an interest in the non-operated Alba producing oil field. At the end of June 2016, EnQuest had interests in 29 UK production licences, covering 41 blocks or part blocks and was the operator of 26 of these licences.

EnQuest believes that the UKCS represents a significant hydrocarbon basin, which continues to benefit from an extensive installed infrastructure base and skilled labour. EnQuest believes that its assets offer material organic growth opportunities, driven by exploitation of current infrastructure on the UKCS and the development of low risk near field opportunities.

EnQuest is replicating its model in the UKCS by targeting previously underdeveloped assets in a small number of other maturing regions; complementing its operations and utilising its deep skills in the UK North Sea. In which context, EnQuest has interests in Malaysia where its operated assets include the PM8/Seligi Production Sharing Contract and the Tanjong Baram Risk Services Contract.