Bottom Line: Fields of Enterprise

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The Independent Online
FOR EVERY 100 barrels pumped out of the Ninian oilfield, 93 contain water. The rest have crude oil, but each barrel from the field costs dollars 10 to fill, compared with a market price of dollars 13.50 for a barrel of oil.

Such stark economics of producing oil from some of the North Sea's maturing fields, like Ninian, may explain Enterprise's desire to get out. But it has had no shortage of buyers who seem prepared to judge the field's remaining riches on a long-term oil price of about dollars 15 a barrel.

The deal - together with Clyde's sale of a 1 per cent stake in Forties - also shows how the characteristics of individual assets are of more import to oil companies than short-term dips in the crude price. Enterprise will benefit hugely from the start-up of two new fields this year whereas Ninian's declining production and relatively high costs are of marginal value to it.

Ninian still has a life expectancy of at least 10 years and offers a growing revenue stream from a strategically located pipeline infrastructure that is likely to be used for transporting oil from other areas. For some, tax changes introduced last year have also improved the attractions of returns from big producing fields like Ninian.

That said, the weak oil price has forced many companies, particularly the pure explorers, to reshuffle their asset portfolios to maximise investment returns. Yesterday's deals are part of that trend and both Enterprise and its smaller counterpart feel they can apply the proceeds to better effect.

Enterprise's move could be a further deck-clearing exercise ahead of a big acquisition this year. The shares, up 5p to 445p yesterday, are fairly valued for the time being.