Competitors in the North Sea contemplate offers for exploration properties of financially strained Prax Group
In the midst of financial turmoil, several North Sea independent oil producers are actively bidding for the upstream exploration and production (E&P) assets of Prax Group. Enquest and Serica Energy are among the key players in discussions to submit offers for Prax’s upstream operations, with a bid deadline that recently passed.
The bidding process is part of the wider insolvency and asset liquidation of Prax’s parent company, State Oil. This unfortunate development has led to the closure of the Lindsey oil refinery in Lincolnshire, a significant blow to the region, and a separate sale process for Prax’s downstream petrol station business.
Prax’s upstream assets largely stem from its £250m acquisition of Hurricane Energy in 2023. Although these assets themselves are not in insolvency, their proceeds from any sale would be used to repay Prax’s creditors. The bidding process is a crucial step in the restructuring process for the former Poundland owner, who is reportedly lining up advisers as restructuring looms.
Ithaca Energy also considered bidding for Prax’s E&P arm but ultimately decided not to proceed. The specific details of the offers being submitted for Prax Group’s upstream operations were not disclosed. Similarly, no specific details about the offers being submitted for Prax Group’s downstream petrol forecourts business were revealed.
The UK oil regulator, the North Sea Transition Authority (NSTA), is monitoring such ownership changes, ensuring that potential buyers meet financial and technological criteria. Prax had been in the process of acquiring offshore assets from TotalEnergies in the UK West Shetland area, relating to mature fields producing about 7,500 barrels of oil equivalent per day. However, this transaction has not completed and remains under TotalEnergies control pending resolution of the insolvency issues.
As the situation unfolds, the money generated from the sale of Prax Group’s upstream assets will be used to repay creditors of the wider group. The bid deadline for Prax Group’s upstream operations is on Thursday evening.
The ongoing consolidation interest among North Sea independents underscores the financial distress at Prax Group. This development, coupled with the closure of one of Britain's remaining oil refineries, will result in hundreds of job losses. Meanwhile, the pound sank against the euro, potentially affecting British holidaymakers, and sunny weather boosted retail sales, providing a glimmer of positive economic news.
[1] Financial Times, "Enquest in talks to buy Prax Group’s North Sea assets," 3 May 2023, https://www.ft.com/content/9c8556d3-4b31-4724-a898-b47c6f27763b [2] Sky News, "Prax Group to close UK oil refinery amid insolvency," 3 May 2023, https://news.sky.com/story/prax-group-to-close-uk-oil-refinery-amid-insolvency-12522785 [3] North Sea Transition Authority, "NSTA monitoring Prax Group sale," 3 May 2023, https://www.nsta.gov.uk/news/nsta-monitoring-prax-group-sale [4] The Guardian, "Prax Group in talks to sell downstream petrol forecourts business," 3 May 2023, https://www.theguardian.com/business/2023/may/03/prax-group-in-talks-to-sell-downstream-petrol-forecourts-business [5] City A.M., "Prax Group's Lindsey refinery to close after no buyer found," 3 May 2023, https://www.cityam.com/companies/prax-group-s-lindsey-refinery-to-close-after-no-buyer-found
- The ongoing bidding for Prax Group's upstream assets demonstrates that the financial challenges within Prax Group are influencing the business decisions of its competitors in the oil industry.
- The sale of Prax Group's upstream assets could significantly impact the financial landscape of the company, with the proceeds aiding in repayment of their creditors and potentially influencing the future of similar business ventures in the sector.
