BP Spins Off Norway Business Into Billionaire’s Oil Explorer

  • Aker to own 40% of new production venture, BP will hold 30%
  • New venture will be seventh-largest producer in Norway

BP Plc sold its Norwegian oil fields, some more than 40 years old, to a company controlled by billionaire Kjell Inge Roekke in a 10.8 billion kroner ($1.3 billion) stock deal.

The new business, called Aker BP ASA, will be the seventh-largest producer in Norway, with daily oil and natural gas output of about 122,000 barrels of oil equivalent, according to statements from the companies Friday. Aker ASA, the Norwegian billionaire’s holding company, will have 40 percent of the venture and BP will retain 30 percent.

The deal, which came after BP considered selling the whole of its Norwegian business, shows how the world’s largest oil companies are using new structures to adapt to lower oil prices. Major producers are seeking to sharpen their portfolios, cut spending and reduce debt by offloading decades-old fields, but the biggest industry downturn in a generation means there are fewer buyers.

“This is a great example of how we need to continue to adapt in this new world and not be stuck in our traditional ways of doing business,” Bernard Looney, BP’s chief executive officer for upstream, said on a conference call. “The direct impact on BP will be less cost in the immediate term, less capital, reduced headcount and over time a growing production profile compared with what we have with our own assets.”

Shares Surge

About half the new company’s production will come from BP and the rest from Roekke’s oil company Det Norske Oljeselskap ASA. The 30 percent of the venture not owned by Aker or BP will be held by Det Norske’s other shareholders. 

Det Norske will issue 135.1 million shares at 80 kroner apiece for all of BP’s stocks, a tax loss carry forward and a net cash position, according to the statement. Aker will buy 33.8 million of these shares from BP at the same price to achieve the agreed ownership structure.

Det Norske shares surged as much as 16 percent, the biggest gain in four years to a record high, and were up 8.4 percent at 90.80 kroner as of 12:10 p.m. in Oslo. Aker gained 5.1 percent while BP dropped 1.2 percent, following oil prices lower.

Small Deal

BP will receive $140 million in cash following the deal, according to the statement. The company plans to sell $3 billion to $5 billion of assets this year.

“Whilst the deal is small from BP’s point of view, we’d view both the receipt of cash and the continued interest through a 30 percent stake in the new entity positively,” Exane BNP Paribas wrote in a note to clients.

Aker BP plans to increase oil and gas production to more than 250,000 barrels of oil equivalent a day by 2023, according to the statement. The company will hold a stake in the giant Johan Sverdrup field, Norway’s biggest discovery in decades. The deal will become the second major acquisition for Det Norske after it bought Marathon Oil Corp.’s Norwegian oil fields in 2014.

BP’s Valhall field in the Norwegian North Sea started production in 1982 and the Ula asset began four years later. The British company started the Skarv field in the Norwegian Sea in 2013, which took the explorer’s output in Norway last year to 62,100 barrels a day.

BP had approaches from other companies for an outright sale of its Norwegian fields, Chief Executive Officer Bob Dudley said in Oslo. Europe’s third-biggest oil company preferred the Det Norske and Aker proposal of merging the assets, he said.

“We think this was the right decision,” Dudley said. If BP had sold for cash, it would have missed out on “the long-term growth potential in this company.”

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