April 18, 2019 / 12:46 PM / a year ago

UPDATE 2-Conoco sells UK North Sea oil assets to Chrysaor for $2.7 bln

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LONDON, April 18 (Reuters) - U.S. energy group ConocoPhillips has agreed to sell its oil and gas assets in the British North Sea to private equity-backed Chrysaor for $2.68 billion, Conoco said on Thursday, making Chrysaor the biggest producer in the region this year.

Reuters had reported on Wednesday that Chrysaor and Conoco were close to sealing the deal, citing sources close to the process who put the value of the assets at up to $2.8 billion.

The North Sea has undergone a major transformation in recent years, as long-standing producers have sold assets to smaller players such as Chrysaor who say they can squeeze more money out of fields due to their nimbler operations.

For Conoco the disposal is part of a continuing refocus on its U.S. operations. “This disposition is part of our ongoing effort to hone our portfolio and focus our investments across future low cost-of-supply opportunities,” said Chief Executive Ryan Lance.

The Conoco assets produced 72,000 barrels of oil equivalent per day (boed) last year, the U.S. company said.

Chrysaor said the deal, which will be backdated to start in January last year and which is subject to regulatory approval, would bring it up to 177,000 boed pro forma in 2018 and 185,000 boed in 2019.

On its website, Chrysaor said it expected production in 2018-2020 to average between 120,000 and 130,000 boed, but a spokesman said last year's production was down due to a pipeline blockage.

Chrysaor, backed by private equity firm EIG Global Partners, is already one of the biggest North Sea player after acquiring assets from Royal Dutch Shell for $3.8 billion in 2017.

Thursday's sale is expected to close in the second half of the year and Chrysaor will pay unspecified interest in the deal which is not included in the $2.68 billion, Conoco said.

BMO Capital Markets and Jefferies are acting for Chrysaor in relation to the Conoco assets, sources said.

Energy and chemicals firm Ineos, owned by British billionaire Jim Ratcliffe, had previously abandoned exclusive talks with Conoco over the fields, including a 7.5 percent stake in the Clair project west of the Shetland Islands, whose other owners are BP, Shell and Chevron.

Another bidder was energy-focused private equity group HitecVision.

In the British North Sea, BP targets around 200,000 boed by 2020, Shell has said it produced 140,000 bpd last year, Total around 180,000 boed and smaller companies such as Premier and EnQuest produce less than 100,000 boed, according to company and Stifel research data. (Reporting by Shadia Nasralla Editing by Mark Potter and David Holmes)

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