Parkmead has blamed rising costs, skills shortages and ageing infrastructure for its decision to abandon the proposed Perth oilfield development in the North Sea.
In a stock exchange update, the Aberdeen-headquartered group said that another major strategy consideration has been the significant increase in the cost of capital, "made more difficult by a lack of appetite from traditional funding sources to support oil and gas projects".
The board said the company is committed to its home region, but "must now necessarily be very careful and selective" in its forward UK investment strategy
"The UK North Sea upstream industry is facing unprecedented challenges associated with volatile oil and gas prices, ageing infrastructure and rising capital and operating costs," read the statement. "This, combined with the sharp increases in taxation in the last 12 months and the loss of key equipment and human resources from the UK North Sea, has resulted in a large number of drilling campaigns and investment decisions on new field developments being delayed, curtailed or cancelled."
As per a recent update, Parkmead's primary focus will be on building a portfolio of gas producing assets and electricity generation from renewable energy.
The company's net zero requirements meant that "significant concerns" were highlighted over the longevity of potential nearby host infrastructure for the project, as well as the inability to pursue a stand-alone floating production system.
"These factors, combined with a lack of public and political support for new oil projects, have resulted in a very cautious and conditional approach from industry during these partnering discussions," Parkmead stated. "Throughout this in-depth and extensive process, it has become clear that without full and committed engagement from industrial partners it would not be practical to progress the Perth development, particularly recognising the massive level of capital investment required."
The P588 and P2154 licences containing the Perth discovery will not now be extended, meaning a one-off impairment of approximately £33m will be recorded in the accounts to 30 June 2023.
Parkmead said it "remains in a very healthy cash position", with ongoing valuable revenues from producing Dutch gas fields and onshore UK wind turbines.
The group has a "very significant pool" of UK tax losses, which total in excess of £150m, meaning it is well placed in respect of making potential acquisitions.
"We are refocusing our offshore UK efforts on acquisitions and also on attractive projects, such as Skerryvore, which are simpler and lower cost than Perth and so present clear opportunities for near-term value creation for shareholders," the update added.
Despite the new fiscal and regulatory challenges, Skerryvore could be developed in a "timely and cost-efficient manner", so Parkmead is planning to drill this well as soon as possible.
As the Operator, with a 50% stake, Parkmead is making progress with well planning, vessels and rig tendering, with a current forecasted drilling date in the fourth quarter, alongside Serica and CalEnergy.
The group's revised strategy has formed the basis of the selective applications in the UK Continental Shelf 33rd Offshore Oil and Gas Licensing Round.
Executive chair Tom Cross commented: "Our team is naturally disappointed that despite huge efforts, working closely with neighbouring operating companies and highly skilled supply chain companies, the combination of challenging factors means it is not economically viable to take the Perth project forward.
"As a balanced energy company, Parkmead will continue to progress its diverse portfolio of gas, oil and renewable energy assets in order to maximise shareholder value.
"A solid base onshore in the Netherlands and the UK puts Parkmead in a strong position to pursue the exciting and significant upside offshore that Skerryvore presents in the near-term, and the Fynn Beauly and Fynn Andrew assets in the medium-term, together with any new licences that may be awarded to Parkmead and its partners following its applications in the current 33rd UK Offshore Licensing Round."
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
