BY Richard Summerfield
Norwegian Energy (Noreco) has agreed to acquire Royal Dutch Shell’s Danish upstream business – Shell Olieog Gasudvinding Danmark B.V. (SOGU) – in a deal worth $1.9bn, making it the second largest oil & gas producer in Denmark, adding output of 67,000 barrels of oil equivalents per day.
The sale includes SOGU’s 36.8 percent ownership stake in the Danish Underground Consortium (DUC), which leads much of the exploration and development of the Danish portion of the North Sea. The DUC, which started production in 1972, has assets in around 15 offshore fields and accounts for around 90 percent of the country’s oil & gas production. The deal also includes SOGU’s portion of the Tyra gas field redevelopment project including the redevelopment and around $1.1bn in decommissioning costs associated with the assets. In a statement, Norco added that it “…expects to maintain strong production in the years to come. As the Tyra hub is being redeveloped, the portfolio will be revitalised and offer improved economics accompanied by prolonged field life.”
For Shell, the divestment of the business is the latest step in the company’s three year, $30bn divestment plan, which started in 2015 following its purchase of BG Group. To date, Shell has divested large portfolios in the British North Sea, Gabon, Thailand and Canada. Under the terms of the agreement, Shell Trading and Supply and Shell Energy Europe Limited will continue to have oil & gas lifting rights from the SOGU assets for a period after completion.
“Today’s announcement is consistent with Shell’s strategy to simplify its portfolio through a $30bn divestment programme and contributes to our goal of reshaping the company into a world-class investment case,” said Andy Brown, Shell’s upstream director.
Noreco said the deal comprised proven and probable reserves of 209 million barrels of oil equivalents at the end of last year, 65 percent of which were liquids. The company said that funding for the Shell deal would be provided by a private placement of new shares and a convertible bond, as well as a $900m loan from BMO Capital Markets, Deutsche Bank and Natixis.
As the transaction is a ‘share sale’, local SOGU staff primarily dedicated to DUC will continue employment with their current company, which Noreco will own upon completion.
The deal, subject to customary closing conditions and shareholder approval, is expected to complete in H1 2019.