Magnora to Invest Oil Cash In Renewables

February 14, 2020

Western Isles - Photo by: Gary R Stevenson - Marine Traffic
Western Isles - Photo by: Gary R Stevenson - Marine Traffic

Oslo-listed company Magnora plans to use the cash generated from oil and gas production at the Western Isles and Penguin offshore projects for renewable energy investments. 

Magnora, formerly known as Sevan Marine, was formed in 2018 following Sembcorp Marine's acquisition of all of Sevan Marine’s intellectual property and proprietary business, and 95% of shares of HiLoad LNG AS for $39 million. 

Sevan Marine was famous for the cylindrical rig and FPSO designs it provided for the offshore oil and gas industry. 

Magnora, an "heir" of Sevan Marine, inherited Sevan Marine’s revenue-sharing deals related to two UK North Sea field developments using its cylindrical FPSO design, Dana Petroleum’s Western Isles, and Shell’s Penguin field. 

The Western Isles production entitles Magnora to #0.5 per barrel produced and offloaded from the Western Isles FPSO (the “FPSO”) during the lifetime of the FPSO. The Penguins deal with Shell is expected to bring Magnora $16 million. 

The Penguins FPSO is currently under construction, and Magnora will receive the amount once the FPSO has produced and offloaded 4 million barrels of oil. The FPSO is set to be completed in mid-2021. 

Renewable investments

In the fourth quarter of 2019, Magnora's Western Isles revenue was NOK 8.8 million. 

The company has previously said that it would distribute cash generated from oil production agreements to shareholders while keeping an eye on future investment opportunities to generate further value. 

In a statement on Friday, Magnora said it has assessed over 100 investment opportunities in Norway and abroad in various industries.

Magnora said: "The company has initiated a process of evaluating potential investment opportunities with the objective of realizing the strategic potential of the company and to generate further shareholder value. The company has considered numerous companies and potential investments over the past 12 months but has to date not found an opportunity that will generate significant value for the shareholders, which is a strict requirement for the Magnora M&A team."

Thus, Magnora has decided to focus on the renewable industry and companies with solutions for long-term sustainability.

"There is a solid and increasing deal-flow within the renewable space, and the company has therefore engaged two veterans from the renewable
industry to assist the Board and Management as advisors in the evaluations. Theis Hanang Pedersen, former Country Manager of Vestas Norway, and Haakon Alfstad, former Head of Onshore Wind in Statkraft, are both already working as a part of the business development and M&A team."

Magnora said that the two anew advisors would work closely with the company’s Executive Chairman, Torstein Sanness, and CEO, Erik Sneve, to review the renewables investment options.

Significant dividends

Magnora said Friday it had returned NOK 499.7 million to its shareholders over the past 15 months, totaling NOK 9.5 per share following the last distribution of NOK 1 on July 11th, 2019. 

The company said: "We expect to continue to generate revenues over the lifetime of the Western Isles FPSO (the “FPSO”), and in addition to the royalty of the Shell Penguins FPSO project. We expect to hold a cash balance of NOK 25-30 million and pay out all remaining cash generated by the agreements to the extent legally permitted."

"Our dividend is expected to be significant in the coming years, supported by the Western Isles FPSO contract and significant payments expected from the Penguins FPSO contract when completed, installed and starts to produce."

"These income streams are likely to provide for significant dividends in 2020, 2021, 2022 and beyond based on the existing contracts. For 2020 we have a dividend capacity of around NOK 1 per share subject to no adverse effects on our operations, underlying contracts, or making any acquisitions."

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