Venture Production Form Strategic Partnership

Venture Production has formed a strategic partnership with a group of North American based investors to acquire and develop 'stranded' gas assets in the southern sector of the UK North Sea. The partnership, known as North Sea Gas Partners, will initially have a total of $300 million in commitments, which will invest alongside Venture in acquisition and development opportunities. Venture will provide 33.3% of the total commitments to the partnership - $100 million, which will be satisfied out of Venture's cash resources.

The North American investors are led by ArcLight Capital Partners, a US based private equity firm that specialises in investment in the upstream E&P and power generation sectors. ArcLight will commit $125 million to the joint venture with $75 million being provided by two further North American institutional investors in equal amounts.

North Sea Gas Partners will acquire and develop assets in the Southern North Sea alongside Venture Production, which will act as the field development and production operator of the developments. In return, Venture will receive an enhanced rate of return if the projects NSGP participates in exceed a specified return on investment.

Forming the partnership enables Venture to achieve three key objectives:
1.   Pursue larger opportunities than would be possible alone;
2.   Enables Venture to benefit from the value that it creates as operator; and
3.   Futher diversifies Venture's portfolio while retaining operational control.

Commenting on the news, Mike Wagstaff, Chief Executive of Venture said:
"North Sea Gas Partners represents a fantastic opportunity for Venture to deploy additional resources in developing 'stranded' gas assets in the North Sea at a time when bringing gas onstream is a strategic priority for the UK. We are delighted to have attracted a lead investor of ArcLight's calibre and resources. We are currently looking at a range of opportunities in the Southern North Sea and North Sea Gas Partners will provide us with an ability to develop a larger portfolio of assets whilst also providing an enhanced return on each Venture pound invested."

Posted 19/04/06

Southern North Sea
For purposes of the North Sea Gas Partners joint venture, the Southern North Sea is defined as Quadrants 40 - 57 of the UK Continental Shelf inclusive. North Sea Gas Partners is not, however, precluded from acquiring assets alongside Venture in other parts of the North Sea.

Joint Operating Arrangements
Venture will directly hold a stake in each asset in which North Sea Gas Partners invests. Venture will, therefore, have a net interest in the asset that will be the sum of its directly held stake and its indirect stake through its investment in North Sea Gas Partners. The direct stake will allow Venture to be appointed as Operator of the asset and a standard joint operating agreement has been agreed between Venture and North Sea Gas Partners.

Venture's Enhanced Return
Venture has contributed 33.3% of the $300m commitments to North Sea Gas Partners. If, however, the projects within North Sea Gas Partners deliver or exceed a specified return on investment to ArcLight and the Investors then, above this threshold, Venture will receive greater than a 33.3% share of profits from the joint venture. This upside potential is designed to reward Venture for its value added as operator. It provides Venture with the potential to generate a greater return on its investment than would be the case if Venture were to develop these assets through standard industry joint operating arrangements. This type of mechanism is common in other industries such as fund management and real estate.

Find out more about:
Venture Production
Venture Production in the Southern North Sea
ArcLight Capital Partners

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