Significant North Sea Investment Strengthens OMV's Upstream-Portfolio
OREANDA-NEWS. OMV, the integrated, international oil and gas company, is undertaking large investments in the North Sea. Agreement has been reached with the Norwegian company Statoil to acquire assets in Norway and the UK (West of Shetlands area).
OMV acquires 19% in the producing Gullfaks field and 24% in the Gudrun field; both oil and gas fields offshore the Norwegian Continental Shelf. In addition, OMV will take over 30% in Rosebank and 5.877% in Schiehallion, both fields located west of the Shetland Islands where OMV already holds a stake in. The agreement with Statoil also involves options for 11 exploration licenses.
An integral part of the transaction is a research and development partnership with Statoil to develop new technologies for the exploration of gas and oil from mature fields. OMV's comprehensive expertise in onshore enhanced oil recovery is an ideal complement to Statoil's experience in offshore enhanced oil recovery.
OMV CEO Gerhard Roiss: “The transaction will provide a huge boost to OMV's strategy and will be a key factor in achieving our 2016 targets. It confirms OMV's clear focus towards increasing the significance of its E&P activities. We are acquiring significant positions in developments lying at the heart of our North Sea growth region, the development capital will be largely funded by the operating cash flows of the already producing assets which are part of the portfolio whilst the purchase price represents a reinvestment of the proceeds we have generated from disposals and working capital reductions from our downstream divisions over the last 18 months.”
“Furthermore, the agreement to partner with Statoil on exploiting a number of exploration activities in the North Sea and West of Shetland area as well as the agreement to jointly work on enhanced oil recovery research adds both to our know how as well as the size of our exploitable asset base in the long term.”, says Roiss.
OMV is substantially increasing its reserves and strengthening its presence in stable OECD countries. This acquisition will see OMV's 2P reserves (2P = proven and probable) increase by ca. 320 mn boe from the current levels of around 1.7 bn boe. Production is set to rise by 40 thousand boe/d by 2014 with a target increase to approx. 58 thousand boe/d by 2016. In the first half of 2013 OMV achieved a daily production of 299 thousand boe/d.
Helge Lund, President and CEO of Statoil: “The Norwegian continental shelf is a world class oil and gas region and Statoil is the largest operator. Over the past years we have delivered strong exploration results and we continue to increase the oil recovery from mature fields. Today's transaction unlocks resources for continued investment in our core areas. OMV is a competent and experienced company and we are also pleased to extend our partnership on exploration opportunities and enhanced oil recovery technologies”.
Jaap Huijskes, OMV Executive Board Member responsible for Exploration and Production: “I am not only glad to see Norway and UK becoming a major contributor to our Exploration and Production portfolio but also to enter into a strategic partnership with Statoil, one of the most reputable offshore operators worldwide and number one player in Norway.”
The purchase price as per effective date January 1, 2013 amounts to USD 2.65 bn and is subject to customary adjustments for the year 2013 which are expected to be approximately USD 500 mn. For the recent Shetland/Lista discovery in the Gullfaks license, a contingent payment of USD 6 per boe for reserves to be developed has been agreed depending on the approval of the development plan.
The transaction will be largely funded out of the proceeds already generated by working capital reductions and disposals from OMV's downstream business segments as well as the company's excellent cash flow - in the first half 2013 OMV had a free cash flow of around EUR 1.6 bn - and existing credit lines.
Additional details on the transaction (all figures net to OMV):
The Gullfaks field (OMV share: 19%) is located in the Norwegian North Sea and is one of the country's largest fields. The field had already produced 2.7 bn boe by the end of 2012 and continues to offer significant potential. A production of ~26,000 boe/d is expected for 2014.
Gudrun (OMV share: 24%) is a new development in Norway. Gudrun is expected to start production in early 2014 and to contribute 15,000 boe/d in 2014 and up to 19,000 boe/d in 2016. The field is located approximately 15 km west of Edvard Grieg. OMV acquired a 20% share in Edvard Grieg in October 2012.
Rosebank (OMV previous share 20%, new: 50%) is currently the largest development in the UK and is located west of the Shetland Islands. OMV already holds a 20% stake in Rosebank and this transaction will see the stake rise to 50%. The final investment decision (FID) for Rosebank is expected in 2014 and production is forecast to begin in 2018. The development is operated by Chevron and estimates put peak production at 50,000 boe/d.
The Schiehallion field (OMV previous share 5,88%, new: 11,76%), also located west of Shetland, is the UK's second largest oil field and is currently undergoing major redevelopment. OMV's share will increase to 11,76% with this transaction. Production is set to resume in 2016 and peak production is estimated at around 12,000 boe/d.
The transaction also involves a Memorandum of Understanding on future research collaboration and additional exploration options. OMV will have the option of participating in up to 11 exploration licenses in the Faroe Islands, West of Shetland area and the Norwegian North Sea. The majority of these licenses are underexplored frontier licenses with significant resource potential. Exploration licenses in Norway are located in the vicinity of the Edvard Grieg field, so that OMV expects to benefit from respective synergies.
Closing of the transaction is expected around year-end 2013 since the transaction is subject to customary conditions, particularly approval by the Norwegian Ministry of Petroleum and Energy and by the Norwegian Ministry of Finance with respect to the Norwegian assets, as well as approval by the UK Secretary of State and customary third party consents regarding transfer of asset related agreements with respect to the UK assets.