Grupa Lotos SA, Poland’s second-biggest refiner, agreed to buy Centrica Plc’s oil and gas exploration assets in the Norwegian part of the North Sea for $175.8 million as part of its foreign expansion.
The state-controlled refiner will buy 14 stakes ranging from 5 percent to 50 percent in licenses linked to the Heimdal hub, the Gdansk, Poland-based company said in a regulatory filing today. Three of the fields already produce oil and gas and their output accounting for Lotos’s stake is about 5,000 barrels a day, or almost double the company’s production.
Lotos has been on the lookout for exploration assets in Norway to reclaim losses it made on the North Sea Yme oil field. In the previous two years the company wrote down a total of 1.18 billion zloty ($380 million) of the value of its 20 percent stake in the Yme license after it failed to start production due to a crack in the platform. Today’s acquisition will allow Lotos to regain about two-thirds of the 1.07 billion-zloty tax it paid for Yme by 2016, Lotos said.
“Due to the unclear future of Yme, we believe this is the right strategy for Lotos to pursue in order to be able to monetize its tax assets within the foreseeable future,” Robert Rethy, an analyst at Wood & Co., said in a note today. The deal “may be taken positively by the market as it should finally put an end to the speculation regarding Lotos’s Norwegian strategy.”
Lotos shares jumped as much as 4.9 percent and traded 1.9 percent higher at 39.42 zloty as of 2:47 p.m. in Warsaw, trimming this year’s decline to 4.3 percent and valuing the company at 5.12 billion zloty.
“Yme was holding us back and with that acquisition we are in a completely different situation,” Deputy Chief Executive Officer Zbigniew Paszkowicz told reporters today, adding that the refiner plans to sell its stake in Yme as early as in 2014.
Lotos plans more acquisitions in Norway to reach its 2015 annual output target of 1.2 million tons of oil equivalent and to be able to fully use the tax shield, Paszkowicz said. With the Heimdal purchase and planned additional Polish output Lotos will produce 800,000 tons to 900,000 tons of oil equivalent a year and the rest may come from another Norwegian acquisition.
The stake in Heimdal gives Lotos access to the equivalent of an additional 9 million barrels of oil in proven and probable reserves. The tax shield for 2013 will help Lotos finance 45 percent of the purchase price, while the rest will come from a loan from state-controlled PKO Bank Polski SA. The refiner will repay the loan in a year as the tax shield will generate another $100 million, Paszkowicz said.
The acquisition comes two months after PKN Orlen SA, its bigger domestic competitor, agreed to buy Canada’s TriOil Resources Ltd to gain access to foreign oil deposits.
Societe Generale SA advised Lotos on the deal.