ConocoPhillips (NYSE:COP) is selling out of the Clair oilfield, and its 24% stake is expected to fetch $2 billion - $3 billion. BP (BP) is the operator of the project and is developing the play with Conoco, Chevron (CVX) and Shell (RDS.A) (RDS.B). The field is estimated to have 8 billion barrels of oil in place making it the biggest in Europe, but not all of that is recoverable. Production from the Clair oilfield began in 2005, and so far only 1.5% of the oil in place has been recovered.
It will cost an estimated $4.5 billion British pounds, or ~$7.335 billion US dollars to bring the Clair Ridge project online. Somewhere around 2016 - 2017, the Clair Ridge project will start producing, with a peak production rate of 120,000 bopd and will produce 640 million barrels of oil during its lifetime. The Clair oilfield is one of the first large offshore projects to use reduced salinity water injection (an EOR technique) to produce oil.
Due to the complex political and technique environment surrounding the project, this asset sale is a positive for Conoco and reinforces its buy thesis. Plus, it can redirect the extra cash to boost output growth from its very promising shale plays. To see how Conoco is going to boost investors returns, take a look at this article: High-Growth, High-Margin Shale Plays Make ConocoPhillips The Top Oil Major. This asset sale was unexpected, but not that surprising considering how other US operators have sold some or all of their North Sea operations. Even so, selling out of one project in the North Sea doesn't change Conoco's free cash flow prospects in the area, as it still has projects like the Eldfisk II and the Aasta Hansteen to look forward to. Those who are interested in how Conoco plans to significantly boost its free cash flow streams through its North Sea and Canadian oil sands operations, take a look at 2 Prime International Assets That Will Propel ConocoPhillips Higher.
