ExxonMobil Sells Norwegian Upstream Assets

ExxonMobil has agreed to sell Eni-owned Var Energi its interests in over 20 producing oil and gas fields in Norway for $4.5bn, the two sides said September 26. 

The sale is part of the US major's previously announced plans to sell about $15bn-worth of non-strategic assets by 2021 as it focuses on higher-value assets elsewhere, including US shale, deepwater Brazil and Guyana – all three of which are oil plays.

The fields, mostly operated by state Equinor and weighted towards oil, include Grane, Snorre, Ormen Lange, Statfjord and Fram, with a combined production of some 150,000 barrels of oil equivalent (boe)/day and were valued at less than $4bn by one analyst when ExxonMobil said it was putting them up for sale in late June.

The acquisition has an effective date of January 1, 2019 and is expected to be completed in Q4 2019 subject to standard conditions precedent, including customary approvals from regulatory authorities.

Var Energi will become the second largest producer on the Norwegian shelf, with total reserves and resources of about 1.9bn boe. Total production is expected to be about 300,000 boe/d in 2019, growing organically to more than 350,000 boe/d in 2023 as the company invests about $7bn in development projects such as Johan Castberg, Balder X and Grand in the 2020-23 period.

The acquisition marks an important milestone both for Var Energi and the company's shareholders Eni (69.6%) and HitecVision (30.4%), delivering on the growth ambitions set out when merging Point Resources and Eni last December.

Planned development projects in the combined portfolio include Balder X, the Snorre Expansion Project, Grand and Fenja, providing an organic platform for further growth in the North Sea and Norwegian Sea. The financial strength from the producing assets provides a basis for further investments in development projects and exploration, as well as future takeover opportunities, said Var Energi. 

According to GlobalData, other growth opportunities include the Trestakk oil field, due to start in 2019; the Snorre expansion project expected to extend field life beyond 2040; and gas discovery opportunities at Lavrans and Mikkel Sor.

Var Energi will fund the transaction from existing cash resources and a reserve based lending debt facility which has been fully underwritten by BNP Paribas and will subsequently be syndicated.

Eni CEO Claudio Descalzi said the assets complement and strengthen Var Energi in core areas well known to management and open up new opportunities for growth. "In one year, we have completely restructured and strengthened the Eni presence in Norway by creating a strong Norwegian partnership based on the shareholders' alignment on strategy and objectives. Furthermore, in coherence with Eni's strategy, the increase in OECD production will contribute to Eni's rebalancing of geographical exposure," he said. Eni also operates in less stable regions, including north Africa.

Point Resources was formed from Core, Spike and Pure in 2016, through the acquisition of ExxonMobil's operated assets in 2017.

For ExxonMobil, non-operated assets in a mature region would be better off in another company's hands. “Our objective is to have the strongest, most competitive Upstream portfolio in the industry,” said Neil Chapman, senior vice president of ExxonMobil. “We’re achieving that by adding the best set of projects we’ve had in many years and divesting assets that have lower long-term strategic value. This sale is an important part of our divestment program, which is on track to meet our $15bn target by 2021.”