Sale of Gas Exploration and Production Assets

RNS Number : 5670J

SSE PLC

22 December 2020

 

SSE AGREES SALE OF GAS EXPLORATION AND PRODUCTION ASSETS

SSE plc has agreed to sell all of its interests in its portfolio of gas exploration and production (E&P) assets to Viaro Energy via its subsidiary RockRose Energy Limited for a total consideration of £120m*. The transaction is based on a 'locked box' economic date of 31 March 2019 and is subject to regulatory approval and partner consent.

The diverse portfolio comprises non-operational equity shares in over 15 producing fields in three regions in the North Sea: the Easington Catchment Area, the Bacton Catchment Area, and the Greater Laggan Area.

As part of the transaction, SSE will retain an obligation to pay 60% of the decommissioning costs**, payable as the decommissioning of the assets occurs.

SSE has stated for some time that its financial investment in E&P assets is a non-core activity and ultimately not aligned with its strategic focus on reaching net-zero emissions. This sale is part of SSE's strategy to refocus its investment on its core networks and renewables businesses, with plans to invest £7.5bn in low-carbon energy infrastructure over the next five years and to treble its renewable electricity output by 2030.

The company has so far secured over £1.4bn from the disposal of non-core assets as part of its £2bn-plus disposal programme by autumn 2021. Today's announcement follows recent agreements to sell its share in energy-from-waste venture Multifuel Energy Limited for £995m, its non-operating stake in Walney Offshore Wind Farm for £350m, and its equity interest in meter asset provider MapleCo for £90m.

Gregor Alexander, Finance Director, said:

"We have said for some time that gas exploration and production assets are inconsistent with our future ambitions and vision to be a leading energy company in a net-zero world.

This sale clearly comes at a difficult time for the E&P sector, and the economy as a whole, but we believe it is the right move for our shareholders as we focus our resources on our core low-carbon businesses.

"It represents further progress on our strategy to dispose of non-core assets as we look to invest £7.5bn in essential low-carbon energy infrastructure over the next five years, driving the UK's transition to a net-zero future."

Transaction Details

* The consideration of £120m comprises £25m in cash (payable at completion) with the remainder, adjusted for leakage, forming a vendor loan (repayable three years from completion accruing interest at 7.125%). Additional consideration of up to £40m is payable if the gas price in H2 2021 reaches agreed thresholds; and up to $750k per Bcf if the Glendronach prospect, in the Greater Laggan Area, successfully produces. There is currently expected to be a small gain on sale, which will be part of SSE's reported results.

** £390.1m is the net present value of the estimated decommissioning costs as per note 9 of SSE's financial results to 30 September 2020.

Additional Notes

Bank of America Securities acted as financial advisor to SSE on this transaction. CMS acted as SSE's legal advisor.

About the Buyer

RockRose Energy was founded in 2015 to identify onshore and offshore production opportunities and infrastructure projects. The company grew rapidly through the purchase of packages of predominantly non-operated assets in the North Sea. Key acquisitions included Idemitsu's UK business in 2017, a portfolio of producing assets in the Dutch sector of the North Sea from Dyas in 2018, and Marathon Oil's UK assets in 2019. In 2020, RockRose Energy was acquired by Viaro Energy, a subsidiary of Viaro Investment, in a £247 million deal.

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