Centrica and Bayerngas Join Forces to Form New E&P Company
- Business & Finance
Centrica and Stadtwerke München (SWM) have reached an agreement to combine Centrica’s European oil and gas exploration and production (E&P) business with Bayerngas Norge to form a newly incorporated joint venture and create an independent European E&P company.
The Joint Venture will have two shareholding entities. Centrica will own 69% and Bayerngas Norge’s existing shareholders, led by SWM and Bayerngas GmbH, will own 31%. The effective date of the transaction is 1 January 2017 and it is expected to close in the fourth quarter of 2017, subject to competition and regulatory approvals and other conditions.
Iain Conn, Group chief executive of Centrica, 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.”
Florian Bieberbach, chief executive of Stadtwerke München, said: “We are convinced that by combining our E&P activities we will create an even stronger and more sustainable business. With its similar background and strategy, Centrica is an ideal partner to develop and grow this joint venture together.”
The JV will comprise Centrica’s assets in the UK, Netherlands and Norway and Bayerngas Norge’s assets in the UK, Norway and Denmark.
The portfolio of the JV will be gas weighted, with approximately 66% of total reserves and resources comprising natural gas. It will contain a mix of producing assets, development options and exploration licences, as well as one operated UK onshore terminal at Barrow-in-Furness, and will have the financial capacity to take advantage of investment opportunities.
There is near and medium-term production from assets including Morecambe, Greater Markham, Kvitebjørn and Statfjord, and from recently on-stream assets Valemon, Cygnus and Ivar Aasen. The joint venture will also own an development assets, including Maria, Oda, Fogelberg and Skarfjell in Norway and Hejre and Solsort in Denmark.
The JVwill control a portion of the combined portfolio, with operatorship of approximately 22% of its expected 2017 production. Centrica expects to acquire and market all production from the JV’s assets under marketing and sales agreements.
Following completion of the transaction, it is intended that the joint venture will manage its day-to-day operations independently of Centrica and SWM as shareholders. The management team will be led by Chris Cox, currently managing director of Centrica E&P, as chief executive officer.
On completion, existing Centrica E&P and Bayerngas Norge employees who are employed by entities that are contributed to the joint venture will continue to be employed by those entities and it is expected that they will therefore transfer to the joint venture with their employers. In addition, a number of Centrica employees that are dedicated to Centrica’s E&P business will also transfer to one of the contributed entities and join the Joint Venture on the same basis.
The Board of the JV is expected to be comprised of the CEO plus four representatives from Centrica and two representatives from SWM Group. The JV will be incorporated and tax resident in the UK and its headquarters will be in the Greater London area.