Det Norske Acquisition of Marathon Oil Norway
Det norske oljeselskap ASA (“Det norske”) has entered into an agreement to acquire Marathon Oil Norge AS (“Marathon Norway”) for a cash consideration of USD 2.1 billion (NOK 12.6 billion).
The cash consideration is based on a gross asset value of USD 2.7 billion and is adjusted for debt, net working capital and interest on the net purchase price. The effective date of the transaction is 1 January 2014 and it is expected to close in the fourth quarter 2014, subject to regulatory approvals.
“The acquisition of Marathon Norway is a big step for Det norske as a company,” said Karl Johnny Hersvik, Chief Executive Officer of Det norske. “Marathon Norway is an excellent fit for Det norske, given the operational expertise, access to cash flow and the production profile it brings. The acquisition is important when it comes to meeting our funding requirements for Ivar Aasen and Johan Sverdrup, and to reducing Det norske’s overall risk profile”.
Strategic rationale
Marathon Norway represents an excellent strategic fit for Det norske:
• Its portfolio of quality assets comes with limited capital expenditure commitments, low historic tax balances and high near-term production that complement the planned production start of Det norske’s Ivar Aasen and Johan Sverdrup developments.
• Marathon Norway’s organisation brings significant operational experience from the Alvheim fields, which adds to Det norske’s exploration and development capabilities.
• Marathon Norway’s assets are geographically focused and are all producing through the Alvheim FPSO that boasts a robust operating track record. Furthermore, the company’s assets are oil rich (80% of the reserves are oil).
After the transaction, Det norske will have 202 million barrels of oil equivalent (boe) of 2P reserves. The plan for development and operation for Johan Sverdrup, scheduled for submission in February 2015, will increase reserves significantly. In addition, the combined company will have contingent resources amounting to 101 million boe, excluding Johan Sverdrup. Further identified upside in Marathon’s portfolio is estimated at approximately 80 million boe. Combined 2013 production for the two companies amounted to approximately 84 thousand boe per day, making Det norske one of the largest listed independent E&P companies in Europe in terms of output.
“The strategy and vision of Det norske has always been to create a strong Norwegian E&P company. With this transformational transaction we have achieved our goal well ahead of schedule”, said Sverre Skogen, Chairman of the Board of Det norske. “We believe that there is still high potential on the Norwegian Continental Shelf and Det norske will remain a pure play NCS company”.
Financing
Det norske has secured a fully committed and underwritten acquisition loan facility for the full cash consideration. This facility has been provided by BNP PARIBAS, DNB, Nordea and SEB. The company has mandated and is in advanced discussions with the same four banks to finalize a seven year Reserve Based Lending facility of USD 2.75 billion. This long-term facility will replace the acquisition loan and refinance Det norske’s current facilities. As an integral component of the long-term financing plan, the company will strengthen its equity base by issuing the NOK equivalent of USD 500 million in new equity through a rights issue. The company’s largest shareholder Aker Capital AS has pre-committed to subscribe for its 49.99% pro rata share of such rights issue. The remaining 50.01% is fully underwritten by a consortium of banks. With this equity issue, the company has secured the financing of its current work program until first production from the Johan Sverdrup field.
The acquisition of Marathon Norway will increase Det norske’s financial robustness and its ability to absorb the impact of any changes in future capital spend. This will improve the company’s credit profile and reduce the cost of capital.
Set for further growth
After the acquisition Det norske will have more than 450 employees. No redundancies are expected as a result of the transaction given the breadth of opportunities across the growing organization.
“Marathon Norway has a material portfolio of oil-producing assets, and together with Det norske’s development projects, this provides a diversified and balanced asset base and creates a strong platform for future organic growth”, Hersvik said.
The completion of the transaction is subject to approval by the relevant Norwegian and European Union authorities. An extraordinary general meeting of Det norske will be scheduled for late June to approve the rights issue.
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