PowerGen paying pounds 123m for Lasmo North Sea package

Click to follow
LASMO, the struggling oil explorer, is raising pounds 123m from the sale of a package of North Sea assets to PowerGen, the privatised electricity generator.

The move takes Lasmo's total disposal proceeds this year to pounds 400m and more than pounds 1bn over the past two. It will use the funds to reduce debts and finance a large field development programme.

The sale includes a 5 per cent interest in three gas fields in Liverpool Bay, cutting Lasmo's remaining stake to 25 per cent. The fields, which contain one trillion cubic feet of gas, are being developed at a cost of almost pounds 1bn and will fuel PowerGen's gas refurbished power station at Connah's Quay, Clwyd, in three years' time.

The deal boosts PowerGen's interest in Liverpool Bay to 9 per cent - last month it acquired nearly 4 per cent in the area from Monument Oil & Gas. Other assets in the package include a 12 per cent holding in Ravenspurn North and a 3.75 per cent stake in Johnston, both North Sea fields.

Lasmo said it would make a pounds 29m profit on the disposal, which is subject to consent from the Department of Trade and Industry. It could receive a further pounds 1m payment if there is more exploration success in Liverpool Bay.

The sale will not have any significant impact on its expected daily production, which is expected to increase by about 40 per cent from 1992 to 220,000 barrels of oil equivalent by 1996. Commercial reserves attributable to the unwanted assets amount to about 37 million barrels of oil equivalent, while net daily production next year is estimated at 7,000 barrels.

Joe Darby, who replaced Chris Greentree as Lasmo's chief executive in February, said: 'The sale underlines our resolve to manage the business prudently in a difficult trading environment and the proceeds will be used to strengthen the company's finances.'

City analysts estimate it has an pounds 800m debt pile - equivalent to about 80 per cent of net assets.

The company is also attempting to sell its 35 per cent holding in the Markham gas field, but talks with potential buyers are thought to have stalled because of a high asking price approaching pounds 120m.

'If we get a premium price we will sell it, but we will not make a fire sale,' Norman Davison Kelly, director, said. 'We will also continue to tidy up our asset base but next year's disposals are unlikely to be as dramatic as in 1993.'

The deals are part of PowerGen's strategy to create a portfolio of gas producing assets. It is also a joint partner in Kinetica, the UK's second largest gas distributor.

Lasmo shares edged up 1p to 114p. PowerGen rose 5p to 540p.

View from City Road, page 30