Venture Production Looking To Expand In "Third" Direction

Newly floated North Sea oil operator Venture Production Plc aims to expand abroad, while increasing ten-fold the amount of crude it pumps from its existing portfolio, Chief Executive Bruce Dingwall said.

The Aberdeen, UK-based operator, which is present in Trinidad as well as the North Sea, is aiming to acquire "a third leg" - another set of international assets.

"We are working on some more deals and maybe we will be able to find that third leg over the next one to two years," Dingwall told Reuters this week.

But he said the existing portfolio was already on course to bring about a significant increase in production, despite the maturity of the North Sea province.

The Sycamore group of North Sea oilfields, which also includes Birch and Larch, will be producing 20,000 barrels of oil per day (bpd) when the Sycamore field comes onstream early in 2003, Dingwall said in an interview.

"That will be a 10-fold increase in three years," Dingwall said. When the Aberdeen-based company bought the fields from Lasmo, now a unit of Italy's ENI, they were producing 2,000 bpd and are already up to 12,000 bpd, he said. Dingwall said the key for Venture is "focus", buying up assets at good prices that may not fit the portfolios of other companies.

"It's a big asset to us, a small asset to others," he said. Stressing that the company is only a production company, he said: "We're not an exploration bet. We hedge very carefully. We buy assets where we can add value. We have grown at a massive rate."

"We don't outsource. We are extremely well capitalised," he continued, adding that Venture Production, with a market value of about 180 million pounds ($265 million), has a $100 million facility with the Royal Bank of Scotland.

The market of late has seemed impressed by lean operators such as Venture Production, which analysts have said are relatively well placed to develop in the North Sea, where oil extraction is increasingly difficult and costly as the field matures.

In March this year, Venture Production floated on the London Stock Exchange, raising more than 32 million pounds ($47.05 million) in capital.

Dingwall said: "What the market liked (about Venture) was its differentiated strategy."

The shares have held around steady, more or less in line with the overall sector.

By 1245 GMT, Venture Production shares were flat at 167-1/2 pence. Some analysts have said the smaller, independent sector in general is growing in importance for the mature North Sea as multinationals turn their attention towards younger fields. "For smaller companies the opportunities are going to get better," Dingwall argued.

"Majors are already in the process of rationalising. Big players are going to reshape their portfolios. If they are not going to invest, they will sell it off."

He also said a new 10 per cent British tax imposed on North Sea operators companies in the April budget was damaging for the industry as a whole, but less damaging for companies like Venture Production, which are seeking to acquire new assets in the province, than for majors which are scaling back.

"We've lost value, you can't duck from that, but we got our assets at good prices," Dingwall said.

Chancellor Gordon Brown's new levy adds to an existing 30 per cent corporation tax and Petroleum Revenue Tax (PRT) which is levied on some fields, but he sweetened the pill with higher allowances for reinvestment and a promise to remove royalties payable on older fields.

The industry has said the changes will drain it of an extra £7.6 billion by 2010 if oil prices stay at the government's forecast of $21.50 a barrel.

It is lobbying for Brown to revoke the measures. Although he has so far shown no sign of doing so, Dingwall predicted that if investment plummeted in the North Sea, as many warn it will, the government would be forced to change tack.

"This tax will make sure that the decline (in the North Sea) continues. Most basins which get to this level of maturity are incentivised," Dingwall said.

"If there are serious problems, the Treasury will change."

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