Hurricane Energy buyer Prax Group is targeting a growth surge in the UK North Sea, aiming to become a 50,000 barrels of oil equivalent (boe) per day business.
That will mean ramping up production to more than six times that of Hurricane’s current average daily output of 7,710boe, as of March.
Prax, which is UK-based and largely focused on midstream and downstream assets, completed a £250 million deal earlier this month to acquire the west of Shetland operator as it makes a shift into upstream.
Billionaire’s ‘vision’
Head of exploration and production (E&P) Alessandro Agostini said the move was part of the “vision” of Sanjeev Kumar Soosaipillai, billionaire chief executive and co-owner of Prax.
Mr Agostini added: “The blueprint for the company, and if you hear Sanjeev you’ll hear it a million times, has always been we want Prax to be an integrated company along the value chain.”
Margins for different parts of that value chain can vary, so spreading the risk was a big driver for Prax’s shift into upstream.
Prax is one of the largest suppliers of petroleum products in the UK.
As an integrated company it can “overlay” its trading capabilities on everything else, explained Mr Agostini, who joined the group in April 2022.
He said Hurricane was among a “handful of names” on its acquisition shortlist.
Five ‘strong’ offers for Hurricane
On the flip-side, Prax was one of five “strong” offers made for the Hurricane business.
Hurricane’s board said it would see shareholders “better off” than a planned wind-down or an unscheduled end to production.
It was the firm’s formal sales process and the discretion it gave that led to Prax going in.
Mr Agostini said: “It was about doing a deal that was possible within the limitations that were surrounding it, and getting access to a great team that could help us grow the company.”
Group looking at other acquisitions
Prax’s stated objective is 50,000 barrels a day in the medium-term. It doesn’t have a fixed timing for this but Mr Agostini said “two years or four years” could be the goal.
He added: “The 50,000 barrels I think is a realistic objective that, once reached, we could reassess and say ‘OK, we want to grow more, we want to grow further, we want to grow in different geographies’ or… ‘we’ll maintain this level’.
Prax is not an only E&P company. We do not want to grow one part predominantly to the detriment of the other. We need to be careful at building everybody together.
“The initial target of 50,000 barrels fits well with the current size of Hurricane.
“If we want to grow more, it will done in concert with the rest of the company.”
Lancaster, Hurricane’s only asset is currently producing fewer than 8,000bopd so it will take more acquisitions for Prax to hit that goal.
Mr Agostini revealed the company is already looking at other acquisitions focused wholly in the UK North Sea. It also has bases in Houston and Singapore, and the head of E&P said the day will eventually come when “we will be also looking at different geographies”.
More drilling possible west of Shetland
Hurricane said earlier this year production on Lancaster could continue into 2024.
Mr Agostini insisted Prax would be doing “whatever we can to make that asset go further, produce more”.
He added: “If it makes economic sense and gets the permission that it needs to get, we will certainly look at drilling more wells on the Lancaster field”.
In terms of strategy, he described the choices facing Prax as a “balancing act”.
If it makes economic sense and gets the permission that it needs to get, we will certainly look at drilling more wells on the Lancaster field.”
The wiser choice is probably to “acquire some more production before going and drilling more wells in Lancaster”, he added.
He continued: “I also have to consider that I don’t have 20 years in front of me on Lancaster to drill more wells. The time frame is much, much shorter.
“There isn’t, obviously, a decision now, but we will certainly look at doing more on Lancaster if it makes economic sense.”
Prax is not involved in the current UK North Sea licensing round.
But if another firm wins acreage it is interested in, it may engage in farm-in talks.
“It’s not that we didn’t want to do the round, Mr Agostini said, adding: “We didn’t have the ability of doing it and thought we could have opportunities after.”
Read more: Who are the secretive billionaire couple who now own Hurricane Energy?
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