Det Norske Oljeselskap ASA, the oil producer controlled by billionaire Kjell Inge Roekke, is raising debt capacity by $800 million to fund projects amid a slump in crude prices without having to sell shares or assets.
A group of banks has fully underwritten a revolving credit facility of $500 million and the company is contemplating a new subordinated bond issue of $300 million, it said in its first-quarter earnings report today. The company expects to have the new funding in place by the end of May.
“We’ll be able to fund ourselves through this situation, so we’re clearly creating a bit of a buffer,” Chief Executive Officer Karl Johnny Hersvik said in an interview following a presentation in Oslo. “We’re confident we won’t need to raise new equity for the existing work program.”
Det Norske is adding debt after it was squeezed by the 50 percent drop in oil prices in the last half of 2014 just as it’s preparing for its biggest investments on the Johan Sverdrup development, the largest offshore project in Norway in decades. Oil prices fell just after Det Norske spent $2.7 billion buying Marathon Oil Corp.’s business in Norway.
Det Norske rose as much as 5.4 percent, the most in almost two weeks, and was up 0.7 percent at 57.40 kroner a share as of 10:25 a.m. in the Norwegian capital.
“The company’s funding gap may be closed,” Teodor Sveen Nilsen, an analyst at Swedbank AB, said in a note. “If the company is successful in raising more debt at decent terms without use of equity, we believe this will remove the uncertainty around long-term funding.”
The new funding efforts come after Det Norske, 50 percent owned by Roekke’s Aker ASA, struck a deal with bondholders last month to amend loan covenants.
Aker has said it views the oil slump as an opportunity for the companies it owns -- including Det Norske -- to make acquisitions at advantageous prices. Det Norske has reviewed 10 to 15 opportunities for asset purchases offshore Norway since autumn, concluding none created enough value for the company, Hersvik said during today’s presentation.
“We’ll keep our eyes and ears open,” he said in the interview. “There’s a lot of volume for sale.”
Det Norske’s net income rose to $2.4 million in the first quarter from a $2.6 million loss a year ago, missing analyst estimates of $12.9 million.