Centrica to form exploration and production JV with Bayerngas Norge
British utility company Centrica has signed an agreement to merge its European oil and gas exploration and production (E&P) business with Bayerngas Norge, resulting in the creation of a joint venture (JV) company.
Under the agreement signed with Stadtwerke Munchen (SWM), Centrica will have 69% interest in the JV by contributing £340m between now and 2022, with the remaining 31% owned by Bayerngas Norge’s stakeholders SWM and Bayerngas.
The combined entity will have producing and development assets in the UK, the Netherlands, Norway and Denmark, in addition to an estimated net present value of £100m to £150m through synergies from cost savings and portfolio optimisation.
The JV portfolio will be gas weighted, with nearly 66% of total reserves and resources comprising natural gas.
Centrica group chief executive Iain Conn said: “As part of our strategy of 2015, we have been aiming to develop a more focused and stronger E&P business which will contribute to the resilience of the group while limiting Centrica’s E&P participation.
“Alongside the recently announced disposals of our Canada and Trinidad & Tobago assets, this joint venture creates a larger, more sustainable and more capable European E&P business and brings together like-minded shareholders who have a shared strategic vision on the role of E&P.”
“As one of the largest independent E&P companies in North-West Europe, the new entity will have the possibility to participate in further consolidation and joint ventures, and creates future optionality for Centrica’s shareholders.”
At the end of last year, the combined 2P reserves were 409 million barrels of oil equivalent (mmboe), while 2C resources amounted to 216mmboe.
This year, the production from the combined assets of 27 producing fields is projected to be around 50mmboe and 55mmboe.
Centrica noted that the JV company could be listed, with the possibility of an initial public offering (IPO) in the medium term.
Additionally, it intends to acquire and market all production from the JV’s assets.