Good health of local oil and gas sector makes assets sales viable while new players consider coming in
Mergers and acquisitions activity continues to bubble away in Norway despite geopolitical and oil price headwinds, and there are even suggestions that new entrants could materialise.
So far this year, Norway has seen one major transaction — the local oil and gas company DNO agreeing to acquire 100% of the shares of Sval Energi from private equity firm HitecVision for a cash consideration of $450 million based on an enterprise value of $1.6 billion.
The deal will quadruple DNO’s North Sea production and elevate it to among the top tier of producers in Norway.
Other than that, there have been multiple trades in licences whereby companies buy and sell interests in their petroleum permits, mostly exploration permits.
With the first-quarter reporting season winding down, a number of Norwegian oil and gas companies have said the impact of geopolitics and the lower oil price means there could be good acquisition opportunities.
Then again, market experts tell Upstream there are few, if any, companies which need to sell, but there are companies open to receiving offers.
Pandion Energy is one such example. One analyst asked OKEA’s chief executive, Svein Liknes, during the company’s earnings call if OKEA was looking into a possible transaction with Pandion, seeing as there were good synergies between the two companies’ asset bases.
Liknes responded that OKEA is “always looking for opportunities”.
“So it just depends on what is out there. I cannot go into any details there and neither can I go into any details when it comes to Pandion because we don’t comment on exactly what processes we are looking into,” said Liknes.
“What I am glad to see is that there is still at least a healthy M&A and transaction market in Norway because that is the area where we would like to be as well.”
Upstream has requested comment from Oslo-headquartered Pandion, which is backed by Kerogen Capital, an independent private equity fund manager.
Pandion was established in November 2016 on the basis of the operational platform and licences acquired from Tullow Oil’s Norway subsidiary, and currently produces about 8000 barrels of oil equivalent per day from the Valhall, Hod and Nova fields.
The company has been a very successful explorer — participating in the Iving, Sierra South, Slagugle, Calypso, Ofelia Agat, Ofelia, Kyrre and Mistral South discoveries.
Pandion is currently investing in the appraisal well on the Slagugle discovery, and in maturing the Ofelia discoveries in the Gjoa area towards a plan for development and operation by the end of this year.
A seller’s market
Another company that has grown substantially through acquisition is Aker BP, the chief executive of which, Karl Johnny Hersvik. said in his company’s earnings call that Norway is currently “a seller’s market”.
“So there’s a lot of activity, but the prices right now are not necessarily where we are interested in,” he said.
Hersvik said he believes that a situation is arising in Norway where “due to low oil prices and other, call it, capital allocation mechanisms, there is an opening of activity on the Norwegian Continental Shelf”.
He even suggested that there is “an influx of companies that want to participate” offshore Norway.
His comment was supported by Upstream’s market sources who said that new entrants could materialise, with several companies said to be planning to apply to the authorities to pre-qualify as participants on the Norwegian Continental Shelf.
