Norwegian oil and gas company OKEA has moved forward with the acquisition of 28% stake in an offshore block in Stratfjord Area from Equinor after it was postponed following updated projections for the field.
OKEA agreed to acquire Equinor’s 28% stake in offshore block PL037 in Norway for an initial fixed consideration of $220 million back in March 2023.
The transaction was set to be completed by the end of 2023. However, OKEA postponed the completion of the acquisition following the Equnior’s 2024 updated numbers for the Stratford Area which indicated a 10-15% reduction in volumes over the lifetime of the acquired assets compared earlier projections, combined with an increase in cost.
The reduction in volumes is mainly due to production regularity and well performance and is most significant in the near term, according to projections.
However, OKEA has now decided to proceed with the transaction, recognizing an impairment ranging from $108 million to $157 million (NOK 1.1-1.6 billion) in its financial statements for the fourth quarter of 2023.
Based on the current outlook, OKEA’s board of directors does not intend to propose any dividend plan for distribution in 2024. As part of an agreement between OKEA and Equinor, $60 million of the purchase price consideration will be deferred until end of January 2024.
"After a thorough process, we have concluded that completing the transaction represents the best way forward for OKEA. We remain fully committed to the continued execution of our growth strategy as a leading mid to late-life operator on the Norwegian continental shelf and will work diligently with Equinor and the license partners to develop the full potential of the Statfjord Area" said Svein Liknes, CEO of OKEA.