Centrica and Bayerngas Norge to Create E&P Joint Venture
Monday 17 July 2017
Centrica plc (“Centrica”) and Stadtwerke München GmbH (“SWM”) have reached an agreement to combine Centrica’s European oil and gas exploration and production (“E&P”) business with Bayerngas Norge AS (“Bayerngas Norge”) to form a newly incorporated joint venture (“Joint Venture”) (the “Transaction”) and create a leading independent European E&P company. The Joint Venture will have two shareholding entities. Centrica will own 69% and Bayerngas Norge’s existing shareholders, led by SWM and Bayerngas GmbH, will own 31%. The effective date of the transaction is 1 January 2017 and it is expected to close in the fourth quarter of 2017, subject to competition and regulatory approvals and other conditions.
The Joint Venture will create a strong and sustainable European E&P business by combining Centrica’s cash-generative and relatively near-term production profile with Bayerngas Norge’s more recently on-stream producing assets and development portfolio. The strategic rationale for the transaction is similar for both Centrica and SWM:
Like-minded shareholders with strategic alignment on the role of E&P.
Combines a complementary mix of producing and development assets with strong positions in the UK, Netherlands, Norway and Denmark.
Creates a robust, self-financing entity with an attractive financial profile, enabling organic and inorganic reinvestment and distributions.
£100-150 million of net present value (NPV) expected through synergies from cost savings and portfolio optimisation.
Provides the opportunity to strengthen the entity through further consolidation and joint ventures, including the potential for an initial public offering (IPO) in the medium term.
Iain Conn, Group Chief Executive of Centrica plc, said:
“As part of our strategy of 2015, we have been aiming to develop a more focused and stronger E&P business which will contribute to the resilience of the Group while limiting Centrica’s E&P participation. Alongside the recently-announced disposals of our Canada and Trinidad & Tobago assets, this joint venture creates a larger, more sustainable and more capable European E&P business and brings together like-minded shareholders who have a shared strategic vision on the role of E&P.”
“As one of the largest independent E&P companies in North-West Europe, the new entity will have the possibility to participate in further consolidation and joint ventures, and creates future optionality for Centrica’s shareholders.”
Florian Bieberbach, Chief Executive of Stadtwerke München, said:
“We are convinced that by combining our E&P activities we will create an even stronger and more sustainable business. With its similar background and strategy, Centrica is an ideal partner to develop and grow this joint venture together.”
Overview of the Joint Venture
The Joint Venture combines two complementary portfolios and will create one of Europe’s leading independent E&P companies, with 2016 year-end 2P reserves of 409mmboe, 2016 year-end 2C resources of 216mmboe and expected combined 2017 production in the range 50-55mmboe from 27 producing fields. The Joint Venture will comprise Centrica’s assets in the UK, Netherlands and Norway and Bayerngas Norge’s assets in the UK, Norway and Denmark.
The portfolio of the Joint Venture will be gas weighted, with approximately 66% of total reserves and resources comprising natural gas. The Joint Venture will contain a mix of producing assets, development options and exploration licences, as well as one operated UK onshore terminal at Barrow-in-Furness, and will have the financial capacity to take advantage of investment opportunities.
There is substantial near and medium-term production from established assets including Morecambe, Greater Markham, Kvitebjørn and Statfjord, and from recently on-stream assets Valemon, Cygnus and Ivar Aasen. The Joint Venture will also own an attractive collection of development assets, including Maria, Oda, Fogelberg and Skarfjell in Norway and Hejre and Solsort in Denmark, which provide future optionality for the Joint Venture.
The Joint Venture will control a meaningful portion of the combined portfolio, with operatorship of approximately 22% of its expected 2017 production. Centrica expects to acquire and market all production from the Joint Venture’s assets under marketing and sales agreements.
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