Denmark nods for Noreco’s acquisition of Shell’s Danish assets

Danish Energy Agency (DEA) has granted its approval to Norwegian Energy Company (Noreco) for the acquisition of Shell’s Danish upstream assets and the deal is expected to be closed in May.

Norceo reached an agreement to buy Shell’s assets in Denmark for $1.9 billion back in October 2018.

The deal included Shell’s shares in Shell Olie-og Gasudvinding Danmark B.V. (SOGU) which holds a 36.8% non-operating interest in the Danish Underground Consortium (DUC), which is a joint venture between Total and Nordsøfonden cooperating to recover oil from the Sole Concession holder’s area of the Danish North Sea. Chevron was also a partner in the JV before Total bought its interest last year.

Commenting on the approval by Danish agency announced on Monday, Riulf Rustad, Chairman of the Board of Noreco, said: “Through this transformational acquisition, Noreco will become the second largest oil and gas producer in Denmark and establish itself as a considerable exploration and production company in the North Sea.”

Included in the acquisition are proven and probable (2P) reserves of 209 million barrels of oil equivalents (mmboe) based on an independent CPR assessment as per year-end 2017, of which 65% are liquids. The seller’s share of production from DUC in 2017 was 67 thousand barrels of oil equivalents per day (mboepd).

Altinex AS, a wholly owned subsidiary of Noreco, acquires 100% of the shares in Shell Olie- og Gasudvinding Danmark B.V. (SOGU) and thereby becomes the indirect owner through SOGU of inter alia: a 36.8% interest in Danish Underground Consortium (DUC), which includes a 36.8% interest in the DUC facilities, wells and interconnecting pipelines; a 100% interest in Shell Olie- og Gasudvinding Denmark Pipelines ApS (SOGUP), which will own a 41.4% interest in the Tyra West – F3 gas pipeline; a 36.8% direct interest in the 8/06 Area B License including its corresponding entitlement to hydrocarbons won and saved under the 8/06 Area B License; and a 18.4% interest in the Lulita Field unitization and operations, including its corresponding entitlement to hydrocarbons won and saved under the Lulita Field.

In addition, Noreco has held a 10% interest in the Lulita Field for many years, which means that the company’s interest in the field, post transaction, will be 28.4%.

The DEA’s approval is subject to several conditions, including: Guarantees from Noreco on behalf of SOGU and SOGUP towards the Danish state for obligations in respect of license 8/06, area B and the Tyra West – F3 gas pipeline to be acquired; Secondary liability declarations from Shell towards the Danish state for SOGU´s 36.8% ownership in DUC and SOGUP´s 41.4% ownership in the Tyra West – F3 gas pipeline; Required services level agreement internal within the Noreco group regarding support functions to subsidiary companies approved by the DEA; and certain subsequent conditions related to the Noreco organization.

Following the approval, Noreco will work towards closing the acquisition by the end of May 2019.

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