Kinch seals $120m deal to extract oil and gas for Shell and ExxonMobil

Kinch seals $120m deal to extract oil and gas for Shell and ExxonMobil

OIL tycoon Larry Kinch has signed a deal worth an estimated $120m (£63m) to extract oil and gas from an offshoot of the Brent field for Shell and ExxonMobil.

The production deal is the biggest yet for Kinch’s company, Energy Development Partners, which hopes to sign a bigger contract before Christmas.

EDP will invest around $30m (£16m) in the Barnacle project to access up to two million barrels of oil, worth $120m at today’s prices.

Kinch revealed in September that he was in negotiations with Shell over Barnacle. Drilling is expected to take place next month and production should start early in 2007. Profits will be divided between EDP and the well’s owners, the oil giants Shell and ExxonMobil.

The deal is a stamp of approval for the unique business model devised by Kinch, who previously set up and floated Venture Production. EDP plans to extract oil and gas from under- exploited fields owned by big energy companies.

Leo Koot, EDP’s chief executive, said: “The Barnacle project has helped us achieve a number of other significant milestones working with new partners in new arenas, which has exposed us to exciting opportunities, some of which are expected to deliver production to EDP for the first time.

“With the potential offered by Barnacle, the current oil and gas environment and the pipeline of further prospects and development proposals currently in place or under evaluation, EDP is well placed to continue its process of operational diversification and fiscal growth.”

EDP, which Kinch set up with production director Mike Robinson in 2003, signed a smaller deal two years ago with BP to extract gas from an onshore gas field in Dorset. Last year it raised £200m from investors such as 3i.

Since then, the company has become a certified oil well operator. Koot said: “The past year has been an incredibly active period for the company that has seen us not only continue to build our investment portfolio in a number of exciting undeveloped discoveries, but also look to the next level in the company’s future development by gaining operatorship accreditation.”

The company is eyeing development opportunities which would represent a total commitment of around £80m.

EDP, based at Kinch’s home on the edge of Aberdeen, was advised in the Barnacle deal by David Sheach, a partner at the Aberdeen law firm Stronachs.

Aberdeen-born Kinch is a serial oil industry entrepreneur, having set up set up Petroleum Engineering Services in 1986 and Venture Production in 1997. PES was bought by oil services group Halliburton for £111m in 2000 and Venture floated in 2002.

Last year EDP recruited three heavyweight non-executive directors in Sir Graham Hearne, the former chief executive of Enterprise Oil, Graeme Sword, the head of 3i’s Aberdeen operation, and Mike Sibson, another senior 3i officer and director of Salamander Energy.

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