Conoco to make major UK asset purchase from Norsk Hydro
In a move that will significantly bolster its UK continental shelf oil and gas interests, Conoco Inc.'s UK subsidiary has agreed to acquire the assets of Saga UK Ltd. from Norsk Hydro AS for $540 million. The portfolio includes producing fields Britannia, Alba, and Gryphon and several exploration licenses that Norsk Hydro acquired through its purchase of Saga Petroleum ASA (OGJ, June 21, 1999, p. 24).
The transaction would add total estimated reserves of 113.1 million boe and increase Conoco�s UK reserves by 14%. Conoco (UK) Ltd.'s daily oil and gas production totals are expected to increase by 10% and 30%, respectively.
Hydro says the transaction will generate a pretax gain of about 500 million kroner, which will be reported in the consolidated accounts following completion of the deal. In addition, a current tax saving of about 450 million kroner will be realized, says the Norwegian firm.
Closing on the purchase is expected in the third quarter 2000, subject to UK regulatory and government approvals.
Assets involved
"This acquisition is of the quality and size that we�re interested in, and it�s immediately accretive to earnings," said Conoco Chairman and CEO Archie W. Dunham. "It is large, has substantial oil and natural gas reserves, and expands a core business area where Conoco has a significant existing position.
"The acquisition will increase shareholder value and generate numerous synergistic growth opportunities," Dunham added.
Conoco discovered the Britannia natural gas field, which it says is the largest gas field in the UK. Following completion of the acquisition, Conoco UK�already the largest equity interest holder in Britannia�will have an interest of 51.42%. It also will become the largest equity interest holder in the Alba oil field, with 23.43%.
"We have been a partner and owner of the Britannia and Alba fields from the very beginning, and we know the assets very well,� said Rob McKee, Conoco executive vice-president, exploration and production. "The fields are low-cost operations, and production is sold under favorable contracts, and that generates high margins for us.
"By increasing our interests in these fields at a good price and taking full advantage of Conoco�s corporate and operational synergies, this is a very attractive acquisition," he said.
Besides acquiring an additional 9.01% stake in Britannia field and 11.75% in Alba, Conoco will receive Saga�s 25% interest in Gryphon. Saga�s interests in the Thistle Area�which includes Area 6 (18.28%), Don NE (19.71%), Don SW (41.67%), Deveron (18.28%), and Thistle (18.28%), and 27 exploration licenses covering 2,044 sq km in the UK North Sea and Atlantic Margin�also are included in the purchase.
