UPDATE 1-Norway's Statoil considering major acquisitions - report

Fri Jan 10, 2014 8:15am EST

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OSLO, Jan 10 (Reuters) - Norwegian energy firm Statoil is considering major acquisitions that would dilute the state's stake, Bloomberg reported, a move that would face an uphill battle in parliament as the minority government would need some opposition support.

State-controlled Statoil is looking at potential targets, including Tullow Oil as it wants to reduce its focus on Norway and as the government is seeking to cut its stake from 67 percent to 51 percent, said the report, citing unnamed sources.

"I'm not sure such a proposal would get through parliament even if both the Conservatives and the Progress Party are positive on reducing the government's stake to 51 percent," said Joerund Rytman, trade and industry spokesman for the ruling Progress Party.

He pointed out that a deal would require backing from either of two centrist parties, the Liberals and the Christian Democrats, in addition to the government itself.

"Diluting the state's stake has not been a topic for discussion by parliament so far but I'm sure it will be as part of the upcoming white paper on ownership," Rytman said. "This is not something that will happen overnight."

Statoil and London-listed Tullow both declined to comment.

The government plans to present a white paper by the middle of the year on state ownership in firms such as Statoil, aluminium producer Norsk Hydro, bank DNB, and telecoms firm Telenor in what it said would be the first concrete move to cut stakes.

"There has been no decision on the sale of Statoil shares and we have no further comment on this speculation," the oil ministry said.

Although the government, which came to power in October, wants to cut its stake in Statoil, any deal would be time-consuming. It would need to first present its strategic approach in the white paper, then convince some opposition lawmakers to back its plans.

SHARES RISE

Statoil shares were up 3.2 percent at 1156 GMT and Tullow was up 6.6 percent, both outperforming a 1 percent rise in the European oil and gas index.

Tullow, whose market capitalisation is just under $13 billion, has been among the worst-performing stocks in Europe's oil and gas sector with its shares falling 38 percent over the past year.

Bernstein analyst Oswald Clint played down talk Tullow could be on Statoil's shopping list given the Norwegian firm's own success at discovering oil and gas fields in recent years.

"They aren't as in need of purchasing assets at this point as they were in the past decade so it feels a little bit unlikely to me," he said.

Statoil's hand is also limited in making very large acquisitions as its post-dividend free cash flow is negative because of high investments and the firm has been selling assets in recent years to raise cash.

"This is a continuous process for Statoil, which has a large department that works on acquisitions of both companies and assets," DNB Markets analyst Helge Andre Martinsen said.

"Historically they have been more interested in going for assets or companies with a very concentrated portfolio with a clean fit into their existing assets, rather than a large acquisition."

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