$1 Billion Price Tag No Problem as Roekke Seeks Fresh Oil Deals

  • Det Norske looking to buy more assets after BP Norway merger
  • CEO sees potential in BP fields to produce for longer

Billionaire Kjell Inge Roekke has already seized on the collapse in crude prices to merge his oil company, Det Norske Oljeselskap ASA, with BP Plc’s Norwegian unit. As he looks for more deals, money’s not the issue.

“To pay $1 billion for an asset that’s not attractive is of course a problem, but the amount itself is not necessarily a problem,” Det Norske Chief Executive Officer Karl Johnny Hersvik said in an interview with Bloomberg TV on Tuesday. “That depends on the asset.”

Karl Johnny Hersvik on Sept. 27.

Photographer: Fredrik Bjerknes/Bloomberg

Det Norske and BP Norway are merging to form Aker BP ASA, to be owned 40 percent by Roekke’s investment company Aker ASA and 30 percent by BP. It’s the latest in a string of deals that’s boosted Det Norske’s production almost 50-fold since 2014 to more than 120,000 barrels of oil equivalent a day for the combined company.

The transaction reflects the changing ownership structure of the Norwegian oil industry, which has been dominated by major international oil companies since crude was first produced in the 1970s. Production has halved since a 2000 peak, and several of the biggest companies are rethinking their involvement in Norway as reduced exploration yields fewer new projects and as they slash spending to weather the downturn.

Exxon Mobil Corp. and Total SA are looking at selling assets on the Norwegian shelf, people familiar with the matter have said. Hersvik declined to comment on what specific assets his company is looking at or on any talks with potential sellers.

Det Norske, which paid $2.1 billion in cash to acquire Marathon Oil Corp.’s Norwegian unit in 2014, has benefited from Aker’s support and will continue to rely on its owner as it seeks new deals, Hersvik said. “That gives us a lot of flexibility, and a lot of optionality and creativity around structuring these transactions,” he said.

More Potential

BP operates the Valhall, Ula, Hod and Tambar fields in Norway’s North Sea, as well as the Skarv field in the Norwegian Sea. The British oil major has previously said Valhall has the potential to produce until 2050, though much of the remaining oil and gas has “marginal economics.” Ula is expected to produce until 2028, and Skarv for 20 years from now, according to BP’s website.

Aker BP sees potential to extend all of those dates, Hersvik said, though he declined to provide specifics.

“You will see an increased activity in all these assets, also in the exploration activity,” he said. “We’re not doing these transactions for financial reasons, we’re doing these transactions for industrial reasons. And we have an owner group that are prepared to -- and wish to -- invest.”

Aker BP, which also holds a stake in the Johan Sverdrup field, Norway’s biggest oil discovery in decades, has the potential to produce more than 250,000 barrels of oil a day by 2023, Det Norske has said.

The BP merger, expected to close by the end of the week, will probably result in staff being cut, Hersvik said. The exact number should be known when the reorganization is finalized in mid-November, but it will probably be a “double-digit” number, he said. BP employs more than 800 people in Norway, according to its website, while Det Norske had 534 at the end of 2015, according to its annual report.

“We’ll try to make this as smooth as possible, and to make sure that the process is as quick as possible in order to minimize the time of uncertainty,” Hersvik said.

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