The prior consent of the NSTA must be obtained before a change in control of a licensee company occurs.

The Energy Act 2023 (section 300 and Schedule 21) amended the model clauses within petroleum licences prohibiting a change in control of a licensee without the NSTA’s prior consent.

If a change in control of a company that is a licensee is contemplated, the company must apply in writing to the NSTA for consent to the proposed change in control at least three (3) months before the date on which it is proposed the change would occur (if consent were given). 

Failure to comply could result in, but not limited to, complete revocation of the licence, or partial revocation in respect of the company concerned, which in practical terms amounts to the removal of the company from the licence while the licence continues in the hands of its co-licensee(s).  

The NSTA encourages relevant parties and their advisors to fully acquaint themselves with the change in control requirements before a transaction. Please contact the Licensing Team at approvals@nstauthority.co.uk with any related questions. Early engagement is strongly advised to avoid unnecessary delays in the application process.   

There is a change in control of a company if a person takes control of the company, not having previously been a person who controlled the company. ‘Control’ of a company is construed in accordance with sections 450(2) to (4) and 451(1) to (5) of the Corporation Tax Act 2010 as modified by the licence.

he NSTA considers the financial and technical capability of a licensee to be critical to the delivery of its licence commitments, liabilities and obligations. An overview of normal criteria for the acceptability of a licensee to be a licensee can be accessed here.  

Whilst petroleum production licences are not prescriptive as to what the NSTA must consider when deciding whether to consent to a change in control, the NSTA will consider each application on a case-by-case basis, normally considering:

  1. Whether the proposed change in control may impact the ability of the licensee to meet its licence commitments, liabilities and obligations.
  2. Changes to the technical resources available to the licensee that may compromise its ability to meet its commitments.
  3. Changes to the financial resources available to the licensee that may compromise its ability to meet its commitments. Further information can be found in the NSTA’s Financial Guidance.
  4. The fitness of any incoming controlling company and its directors, and its adherence to Environmental, Social and Governance (ESG) good practice. The NSTA’s general approach to assessing the ‘fitness’ of those who control licensees can be found here and the NSTA’s Governance Guidance can be found here.

 

  1. The transaction’s impact on maximising economic recovery and meeting the net zero target as set out in the OGA Strategy.

Details of the proposed change in control should be emailed to approvals@nstauthority.co.uk and should include, as a minimum, the following information: 

  1. Transaction details: a summary of the transaction, including the new corporate structure, a complete list of affected assets and corporate details of the acquiring entity.

  2. Financial statements: post-transaction pro-forma balance sheet for the acquiring entity and projected cash flow statements.

  3. Obligations overview: an account of all obligations and commitments associated with the affected licenses in the UKCS, complemented with a statement from the acquiring entity affirming its understanding of and commitment to fulfilling these obligations.

  4. Timetable: a structured timeline for completion of the transaction and a summary of its milestones.

  5. Contact information: Contact details of all the parties involved in the transaction.

The above is a non-exhaustive list, and the NSTA may require further information to decide whether to grant consent to a change in control.

As a general rule the NSTA will decide the outcome of an application within three (3) months of receiving it. Nevertheless, the decision may be delayed by the NSTA notifying the interested parties in writing.

The NSTA may:

  1. Consent to a change in control.
  2. Consent to a change in control subject to conditions.
  3. Refuse to consent.

If the NSTA proposes to refuse consent or grant consent subject to conditions, the applicant will have an opportunity to make representations and the NSTA will consider these.

Conditions may be imposed on the company taking control as well as the licensee company and may include:

  • conditions relating to arrangements for the change in control (including a date by which it must occur)
  • conditions relating to the performance of activities permitted by the relevant licence(s); and
  • financial conditions.

The licensee company, the company proposing to take control of the licensee company and any co-licensees will be notified of the NSTA’s decision (and of any conditions).

Where a licensee relies on a guarantee from its current corporate parent or another entity to demonstrate it has the financial capability to meet its licence obligations and will similarly rely on a guarantee from its new corporate parent or another entity, the NSTA (where the guarantor demonstrates it has the requisite financial capability) will require a deed of guarantee from the new corporate parent or other entity to replace the existing guarantee.   

We require any new deed of guarantee to be issued on or immediately following the date on which the change of control becomes effective. Deeds of guarantee should use the NSTA’s form of words for deed of guarantee which can be found here.  Further information can be found in the NSTA’s Financial Guidance.

NSTA Approach on Carbon Dioxide Appraisal and Storage Changes in Control

Should a licensee wish seek a change in control of the licensee of a Carbon Dioxide Appraisal and Storage Licence, the NSTA’s consent must be obtained prior to the event.

The NSTA’s approach can be found here.