UK energy company Centrica is combining its European oil and gas exploration and production business in a joint venture with Bayerngas Norge, creating one of Europe's leading independent E&P companies that will have combined 2017 production in the range 50 million-55 million barrels of oil equivalent from 27 producing fields.
Centrica, the owner of utility British Gas, is the latest European utility that is splitting off oil exploration businesses to focus on energy supply and services. Earlier this year, France's Engie sold its North Sea gas assets to private-equity backed UK-based firm Neptune for US$3.9 billion.
Today, Centrica said that it would own 69 percent in the new company, while Bayerngas Norge's existing shareholders, led by Munich's municipal utilities company Stadtwerke München (SWM) and Bayerngas GmbH, will own 31 percent.
The effective date of the transaction is January 1, 2017, and the deal is expected to close in the fourth quarter this year, subject to regulatory and competition authorities' approval, among other conditions.
The new company will comprise Centrica's assets in the UK, the Netherlands, and Norway, and Bayerngas Norge's assets in the UK, Norway, and Denmark. Some 66 percent of the total reserves and resources of the new venture will be natural gas. The joint venture will contain a mix of producing assets, development options, and exploration licenses, as well as one operated UK onshore terminal at Barrow-in-Furness, Centrica said.
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The joint venture will manage its operations independently from Centrica and SWM, but it will be consolidated in Centrica's accounts following the completion of the transaction.
The new company will invest around 80 percent of its post-tax operating cash flow in organic and inorganic growth options in order to deliver a sustainable medium-term production profile of 45-55 million barrels of oil equivalent annually. In the near term, plans are that the company would invest US$524 million-US$785 million (400-600 million British pounds) a year.
After a two-year lock-up period on any transfer of stakes, the shareholders in the joint venture will have customary exit rights, including the ability to initiate an IPO of the joint venture, Centrica said.
By Tsvetana Paraskova for Oilprice.com
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