WINDSOR, UK – Centrica and Stadtwerke München (SWM) have agreed to combine Centrica’s European oil and gas E&P business with Bayerngas Norge to create a new independent European E&P company.
SWM will have a 31% stake in the joint venture andCentrica 69%. The deal should be completed this fall, pending competition and regulatory approvals.
Centrica says the new company will combine its cash-generative and relatively near-term production profile, mostly from fields in the UK and Norwegian offshore sectors, with Bayerngas Norge’s more recently onstream producing assets and development portfolio offshore Scandinavia.
Iain Conn, Group CEO of Centrica, said: “As one of the largest independent E&P companies in northwest Europe, the new entity will have the possibility to participate in further consolidation and joint ventures…”
The new company will have 2016 year-end 2P reserves of 409 MMboe, 2C resources of 216 MMboe and probable 2017 production in the range of 50-55 MMboe from 27 producing fields.
It will comprise Centrica’s assets in the UK, Netherlands, and Norway and Bayerngas Norge’s assets in the UK, Norway, and Denmark.
The portfolio will be gas weighted (around 66% of total reserves and resources) and will feature a mix of producing assets, development options and exploration licenses, as well as one operated UK onshore terminal at Barrow-in-Furness, northwest England.
It should provide near- and mid-term production from established offshore fields such asMorecambe in the East Irish Sea, Greater Markham, Kvitebjørn and Statfjord in the North Sea, and from the recently onstream North Sea fields Valemon, Cygnus, and Ivar Aasen.
The joint venture will operate around 22% of its anticipated 2017 production. Centrica expects to acquire and market all production from the JV’s assets under marketing and sales agreements.
Under the terms of the deal, Centrica will contribute the whole of its European E&P business and make a series of deferred payments totaling around £340 million ($440 million), post tax, to the JV between 2017 and 2022.
These payments will meet near-term funding requirements for fields where decommissioning is in prospect or imminent in 2017 or 2018.
The JV aims to deliver 45-55 MMboe annually in production, in the process investing around £400-600 million/yr ($518-777 million).
Chris Cox, currently managing director of Centrica E&P, will be the CEO of the JV, which will be headquartered in London. Existing Centrica E&P and Bayerngas Norge employees will continue to be employed by their respective entities.
The two partners expect the merger to create opportunities to speed up and intensify their cost-saving programs and to improve efficiency and optimize the joint portfolio. This they plan to achieve through sharing of technical expertise and best practice, streamlining of operations and areas of overlap, for example at Cygnus in the UK southern North Sea, and corporate/administrative efficiencies.