Lotos takes interest in Sleipner field

  • Business & Finance

Lotos Exploration and Production Norge AS has entered into an agreement with ExxonMobil to acquire a portfolio of assets in the Sleipner gas field, located in the Norwegian sector of the North Sea.

According to Lotos, in 2015, the average production from the acquired fields (attributable to LOTOS Norge) has been 16 thousand barrels of oil equivalent per day (boe/d).

The output is 70% natural gas and 30% condensate, which is light crude oil used in the production of gasoline and LPG. For comparison, in the third quarter of 2015 the average daily production from the assets held by LOTOS (located in Poland, Norway and Lithuania) was 11.7 thousand boe/d, Lotos said.

Lotos also notes that the target production level (natural gas and crude oil) identified in its strategy for 2011–2015 is 24 thousand boe/d.

“With the interests acquired in the Sleipner gas field LOTOS profits in both ways. First of all we have exceeded the production target defined in our 2011–2015 strategy. Secondly, we make another significant milestone in our E&P branch development,” says Paweł Olechnowicz, Grupa LOTOS S.A. CEO.

“The transaction will be financed with LOTOS Norge’s own funds including full recovery of tax assets. Therefore, LOTOS Norge don’t have to acquire any external financing during this transaction,” adds Zbigniew Paszkowicz, Vice-President of the Management Board, Chief Exploration and Production Officer at Grupa LOTOS S.A. and LOTOS Petrobaltic CEO.

The purchase price is $160 million. In addition, a contingent payment of $25 million for Alfa Sentral will be payable when a Plan for Development and Operation (PDO) is approved by the authorities. Furthermore, the parties have agreed a value adjustment mechanism for the 2016-2020 period if petroleum prices increase.

The assets acquired by Lotos Norge in the Sleipner gas field comprise 15% interests in the following production fields: Slepiner Ost, Sleipner Vest, Gungne and Loke, with the operator on each of the fields being Statoil.

Proven and probable reserves (2P) attributable to the interests acquired by Lotos Norge in the production fields total 20.8m boe. At the end of the third quarter of 2015, 2P reserves held by LOTOS stood at 51.8m boe.

The assets acquired by LotosNorge also include a 28% interest in the Alfa Sentral field, which is currently at a pre-development stage. Production from the field is planned to start in 2020.

Sleipner is a major gas hub on the Norwegian Continental Shelf, linked to Continental Europe and Great Britain by a gas pipeline network.

Lotos says that the agreement on the purchase of interests in the Sleipner field is subject to certain conditions precedent, including required administrative approvals in Norway. The conditions precedent must be met by a date enabling the transaction to be closed by the end of 2015. The transaction is planned to be closed in December 2015.

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