Statfjord B platform in the North Sea; Credit: Rune Meyer Amundsen/Equinor

Equinor sets its cap on bringing OKEA as new partner in North Sea field

Two oil and gas firms operating on the Norwegian continental shelf (NCS) – Equinor and OKEA – have entered into an agreement, which will enable the latter to acquire 28 per cent of the working interest in the Statfjord area in the North Sea off Norway from the former.

Statfjord B platform in the North Sea; Credit: Rune Meyer Amundsen/Equinor

The two players made the announcement on Monday, 20 March 2023, explaining that Equinor would divest 28 per cent working interest in PL037 (Statfjord area) with an effective date of 1 January 2023 for an initial fixed consideration of $220 million plus a contingent payment element based on oil and gas prices over a three-year period.

According to Equinor, a 28 per cent working interest in PL037 gives 23.9 per cent in Statfjord Unit, 28 per cent in Statfjord Nord, 14 per cent in Statfjord Øst Unit and 15.4 per cent in Sygna Unit. Since production started in 1979, Statfjord has produced more than 5.1 billion barrels of oil equivalent. The closing of the acquisition is subject to customary government approval and is expected to be completed in the fourth quarter of 2023.

Camilla Salthe, senior vice president for Field Life Extension (FLX), remarked: “With this transaction, we continue to optimise our oil and gas portfolio, welcoming an industrial player with late-life expertise into the Statfjord partnership. This will contribute to diversification and high value-creation from the Statfjord area in the years to come.

“Taken together with the recent acquisitions from Wellesley in Norway, the transaction demonstrates Equinor’s approach to long-term portfolio optimisation and high-grading. We still have high expectations for Statfjord and by developing new ways of working we aim to extend the lifetime of the field towards 2040 and reduce emissions by 50 per cent by 2030.”

As a reminder, Equinor signed an agreement in December 2021 with Spirit Energy to acquire its interests in the Statfjord area, which enabled the Norwegian giant to hold a 78.6 per cent working interest in Statfjord Unit, with Vår Energi holding the remaining interest. Following the transaction with OKEA, Equinor will have a 54.7 per cent working interest and remain the operator of the Statfjord field.

Related Article

In a separate statement, OKEA confirmed the deal. The firm also elaborates that the acquisition price includes tax balances of approximately NOK 300 million ($27.9 million). In addition to the fixed consideration, the agreement contains a contingent consideration structure based on profit sharing on crude oil volumes sold at a realised price of $75–96/bbl in 2023, $64–85/bbl in 2024, and $53–72/bbl in 2025, as well as on dry gas volumes sold at a realised price of 170-341 p/th in 2023, 125–248 p/th in 2024, and 37–75 p/th in 2025.

Furthermore, the profit sharing within these limits is 90 per cent after tax to Equinor and 10 per cent to OKEA, however, for realised prices on crude oil above $96/bbl in 2023 and $85/bbl in 2024 and realised prices on dry gas above 341 p/th in 2023 and 248 p/th in 2024, the profit sharing is on 50/50 after tax basis.

On the other hand, OKEA keeps 100 per cent of realised oil prices above $72/bbl and gas prices above 75 p/th in 2025. The company highlights that Equinor will retain responsibility for 100 per cent of OKEA’s share of total decommissioning costs related to Statfjord A, while OKEA will be liable for its share of decommissioning costs related to Statfjord B and C. Additionally, Equinor will retain responsibility for any decommissioning costs relating to a full or partial removal of the gravity-based structures, should it be required.

Svein J. Liknes, OKEA CEO, commented: “We are very pleased to announce this transaction with Equinor which represents another significant step in delivering value-accretive growth in line with our strategy. Through this acquisition, we are increasing production to well above 40,000 boepd in 2024, nearly three times higher than production at the time of launching our growth strategy in the fall of 2021.

“In addition, we are diversifying our asset base further without the need for any new financing. We look forward to initiating a fruitful cooperation with Equinor and their FLX team and continuing to create value as a leading mid- to late-life operator.”

Moreover, OKEA will pay Equinor $48 million (real 2023) in 2028 as decommissioning security, which will be repaid to OKEA at 4 per cent p.a. real interest until abandonment is completed. The firm says that no new financing is required for funding the transaction as the majority of the purchasing price, based on current forward prices, will be covered by cash flows generated by the assets prior to completion.

Statfjord C; Source: Equinor
Statfjord C; Source: Equinor

OKEA claims that this acquisition matches its strategy as “a leading mid to late-life NCS operator focused on growth, value creation and capital discipline” while “the significant increase in production, reserves and resources, adds scale and diversification and enhances robustness in the portfolio.” This transaction also represents the initiation of a partnership with “a dedicated and competent operator” in the Equinor FLX team, based on OKEA’s statement.

The Statfjord field is located in the Tampen area in the northern part of the North Sea on the border between the Norwegian and British sectors. The Norwegian share of the field is 85.47 per cent and the water depth at the site is 150 metres. Discovered in 1974, the Statfjord field has been developed with three concrete gravity-based production platforms: Statfjord A, Statfjord B, and Statfjord C. Statfjord Nord, Statfjord Øst and Sygna are three satellite fields, which are subsea developments tied back to the main field platforms.

The Statfjord area is perceived to be one of the largest on the NCS in terms of initial oil in place, which was in excess of 6 billion barrels. Statfjord A was put into production in 1979, followed by Statfjord B in 1982 and Statfjord C in 1985. The field is operated by Equinor and the Field Life extension (FLX) unit was established in 2020 with an ambition to deliver a 200 per cent increase in remaining reserves, a 25 per cent cost reduction and a 50 per cent CO2 reduction in the Statfjord area by 2030.

Following the transaction, the field licensees in the Statfjord Unit will be Equinor (40.17 per cent), OKEA (23.93 per cent), Vår Energi (21.37 per cent), and Equinor UK Ltd (14.53 per cent). In Statfjord Øst Unit the partners will be Equinor (29.25 per cent), Petoro (30 per cent), Vår Energi (20.55 per cent), OKEA (14 per cent), Idemitsu Petroleum Norge (4.8 per cent), and Wintershall DEA Norge (1.4 per cent)

When it comes to Statfjord Nord, the licensees will be Petoro (30 per cent), Vår Energi (25 per cent), OKEA (28 per cent), and Equinor (17 per cent) while the Sygna Unit partners will be Equinor (28.025 per cent), Petoro (30 per cent), Vår Energi (20.995 per cent), OKEA (15.4 per cent), Idemitsu Petroleum Norge (4.32 per cent), and Wintershall DEA Norge (1.26 per cent).