USD 2.65 bn transaction to capture value and focus the portfolio

abarrelfullabarrelfull wrote on 19 Aug 2013 12:01
Tags: deals europe north-sea omv statoil top upstream

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Statoil ASA (OSE: STL, NYSE: STO) has signed an agreement to divest minority interests in the Gullfaks and Gudrun fields offshore Norway and exit the non-core, non-operated Schiehallion and Rosebank fields, West of Shetlands.

In addition to the cash consideration of USD 2.65 billion, the transaction with Austrian oil and gas company OMV includes a contingent payment and involves a partnership between the two companies. Statoil reduces its ownership share in Gullfaks from 70 % to 51 % and from 75 % to 51 % in Gudrun, and retains its operatorships on both fields.

"Through this transaction, Statoil captures value created through asset development and unlocks capital for investment in high return projects in core areas. This includes our recent discoveries on the Norwegian continental shelf. We continue to deliver on our strategy to create value through active portfolio management and to further increase our financial flexibility," says Helge Lund, Statoil's president and chief executive officer.

Statoil expects to recognize a gain from the transaction estimated to be between USD 1.3-1.5 billion, to be adjusted for activity between the effective date 1 January 2013 and the closing date.

The transaction will enable Statoil to redeploy around USD 7 billion of capital expenditure, around USD 5.5 billion of which is pre-2020 (excluding potential investments in the recent Shetland/Lista discovery at Gullfaks).

Entering partnership

OMV is an established company on both the Norwegian (NCS) and the UK (UKCS) continental shelves. Statoil and OMV enter into a partnership including potential cooperation on exploration opportunities across Norway, the UK and the Faroese Islands as well as the development of Enhanced Oil Recovery (EOR) technologies.

"Statoil is pleased to strengthen the partnership with OMV on the Norwegian Continental shelf. OMV is already a valued partner in Edvard Grieg and Aasta Hansteen, and this agreement enables our companies to develop the cooperation further," says Lund.

"I believe this is a win-win deal for Statoil and OMV. Apart from the assets, I am especially proud that we can partner with a world-class leader in offshore and EOR technology", says Gerhard Roiss, chief executive officer of OMV.

Demonstrating the value of Statoil's NCS and UKCS portfolio

The transaction builds on Statoil's offshore competence and experience, and track record of realising value through asset development and portfolio management.

As operator of the Gullfaks field, Statoil has added substantial value through successful efforts to maximise oil recovery and recently announced a new discovery in the Shetland/Lista formation. As part of the transaction, Statoil captures upside from this discovery through a contingent payment of 6 USD per boe of reserves developed.

Gudrun is on track for production start-up in the first quarter of 2014. As the operator, Statoil is executing the development on time and below original cost estimates. Today's transaction demonstrates the value of efficient project execution in an asset where Statoil increased its ownership in 2010.

Statoil remains committed to growing its business on the UKCS and is the operator of large field developments including the Mariner project and exploration licenses. By divesting non-core, non-operated developments in the West of Shetlands, Statoil further focuses its UK portfolio.

Statoil's production from the divested assets in the first half of 2013 was approximately 26 thousand barrels of oil equivalent per day from Gullfaks. Production impact for Statoil from the transaction is estimated to around 40 thousand barrels of equity oil equivalent per day in 2014 and 60 boe per day in 2016.

The effective date for the transaction is 1 January 2013. Closing is expected around year end 2013, pending government and partner approvals.

Total proceeds of around USD 15 billion have been realized through divestments by Statoil since 2010, enabling the company to redeploy resources to core, high return upstream projects.

Bank of America Merrill Lynch and Lambert Energy Advisory Limited were financial advisors to Statoil on this transaction.

About the fields

  • Gullfaks
    • An oil and gas field in the Norwegian sector of the North Sea, discovered in 1979.
    • The Gullfaks A platform began production in 1986, with Gullfaks B following in 1988 and the C platform in 1989.
    • Statoil is the operator with a 70 % working interest. Petoro holds a 30 % interest. Following this transaction, Statoil will hold 51 % while OMV will hold 19%, pending approvals.
    • Statoil will retain the operatorship of the field.
  • Gudrun
    • An oil and gas field in the Norwegian sector of the North Sea, discovered in 1975.
    • Planned production start in 2014
    • Statoil is the operator with a 75 % working interest. GDF Suez E&P Norge holds 25 %. Following this transaction, Statoil will hold 51 % while OMV will hold 24%, pending approvals.
    • Statoil will retain the operatorship of the field.
  • Schiehallion
    • An oil field on the UKCS, west of Shetland, discovered in 1993.
    • Production at the field began in 1998.
    • Statoil holds 5.88 %, BP holds 33.35%, Shell holds 54.89 % and OMV holds 5.88 %. Following this transaction, Statoil will hold 0 % while OMV will hold 11.76 %.
    • BP is the operator of the field.
  • Rosebank
    • An oil and gas discovery on the UKCS, west of Shetland, found in 2004
    • Field development project, FID planned early 2014.
    • Statoil holds 30 % while Chevron holds 40 %, OMV holds 20 % and Dong holds 10 %. Following this transaction, Statoil will hold 0 % while OMV will hold 50 %.
    • Chevron is the operator of the field.

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