North Sea oil minnows at risk of being swallowed

By Farah Master

LONDON (Reuters) - Tighter global credit has forced independent oil companies to sell their North Sea assets cheaply and the trend is set to last until oil prices rally.

Even oil companies with valuable assets have been hit hard by a plunge in oil prices from a record high of more than $147 (103 pounds) in July 2008 to around $40 a barrel.

The effects have been made worse by tight credit and falling energy demand.

Small independent upstream companies with existing project developments and insufficient cash flow positions are divesting their assets at attractive valuations, to get immediate access to capital.

"What is happening is that a lot of the players who got ambitious funding at $140 are now in trouble and as a result they represent buying opportunities," Andrew Moorfield, Head of Oil, Gas and Energy at Lloyds TSB Corporate Markets, told Reuters.

Companies with a heavy portfolio of North Sea assets were particularly under pressure because of the high capital intensity of oil fields in the region, and the amount of time required to develop them.

"If they are selling at $40 a barrel or even less, their profit per barrel is quite tight," said Charles Esser, energy analyst at The International Crisis group.

ATTRACTIVE VALUATIONS