DONG E&P Norge is divesting its shares of five Norwegian oil and gas fields to Faroe Petroleum in a US$70.2 million deal, as Faroe moves to raise $81 million (£60.8 million) to fund the acquisition, as well as accelerate its Brasse discovery towards development.
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Image of Tambar operations, from BP. |
Should the five field deal be approved, Faroe will acquire 20% working interest in Ula; two tie-back fields to Ula: 45% in Tambar, 37.8% in Tambar East; 55% in Oselvar; and 50% in Trym.
DONG Energy operates the subsea installations Oselvar and Trym and is partner in Ula and Tambar, which are both operated by BP.
Earlier this month, BP gained approval from the Norwegian Petroleum Directorate to extend the life of the Tambar field until 1 January 2022.
As for Oselvar, the International Energy Agency (IEA) said in April that DONG Energy intends to shut down its Oselvar field, more than a decade earlier than planned, and just five years after first oil in 2013.
“DONG has reportedly seen a significant decline in recoverable reserves as reservoir pressure has dropped faster than expected at Oselvar, and might be looking to use parts of the infrastructure at the Centrica operated Butch field on the UK side,” the IEA said in April. “DONG is now looking to shut down Oselvar, which is currently producing only 2000 b/d, as early as 2018.”
LR Senergy is estimating that the acquisition will add approximately 19.8 MMboe of 2P reserves. Faroe is anticipating the fields will provide an additional 8000 boe/d of production in 2016, and increase the group’s aggregate average production to between 15,000 and 17,000 boe/d for the year to 31 December 2016, with some 60% of liquids, and 40% gas.
Last year, the five fields, which are located in the southern part of the Norwegian North Sea, contributed about 12,000 boe/d to DONG’s total 112,000 boe/d.
The deal is subject to certain conditions, and is expected to be complete by the end of 2016.
To fund the deal, Faroe said it intends to conduct a placing with certain institutional investors and the directors of the company to raise gross proceeds of approximately $81 million (£60.8 million) in order to fund the deal for the five fields, and to accelerate Faroe’s recent Brasse discovery towards development sanction.
Faroe said that if the acquisition deal is not approved, the company will use the unutilized net proceeds to fund similar acquisitions.
"The acquisition of these producing fields creates a new strategic hub for Faroe, centered around the Ula platform, in one of our core areas offshore Norway. As well as the strategic nature of this deal, the acquired assets will have a material impact on production, reserves, cash flow and debt capacity,” Graham Stewart, Faroe chief executive said.
“We have reviewed a significant amount of opportunities in the lead up to this, and as a pre-qualified operator in Norway, this portfolio of assets provides the most strategic sense for us, delivering synergies and upside potential from our existing portfolio,” Stewart said. “The proposed placing also announced today will ensure we continue to take advantage of the growth potential within the portfolio in the most capital efficient manner; taking advantage of exploration opportunities and progressing our development projects while maintaining balance sheet strength and flexibility; delivering our goal of becoming a self-sustaining full cycle E&P company.”
DONG Executive Vice President David Cook was also satisfied with the proposed deal.
“It is very satisfying that we have reached an agreement with Faroe in respect of these five assets. This transaction is an important step towards optimizing our oil and gas asset portfolio with a focus on high quality, low-cost assets,” Cook said.
Earlier this week, Faroe hit oil at a side track well to its Brasse discovery in PL740 in the Norwegian North Sea. It reached a total depth of 2530m and encountered a 25m oil column and a 6m gross gas column.
In June, Faroe hit oil at the Brasse well using the Transocean Arctic drilling rig, after drilling reached a total depth of 2780m where 18m of gas, and approximately 21m oil in a Jurassic reservoir were encountered.
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