* Marathon fails to sell smaller UK business
* Deal worth $2.7 bln including debt
* Det norske shares rise as much as 9 pct
* To finance deal through bank loan, rights issue
(Adds detail, analysts, valuation, share reaction)
By Balazs Koranyi and Joachim Dagenborg
OSLO, June 2 Marathon Oil Corp is to
sell its Norwegian business for $2.1 billion to oil exploration
group Det norske, part of plans to shed assets in
Norway and Britain to free up cash for the U.S. firm's shale
activities in the United States.
The deal goes some way towards Marathon's aim of quitting
the North Sea and will transform Det norske into a full-blown
exploration and production company.
Marathon had said in December it would try to sell its
businesses in Norway and Britain to invest in its U.S.
liquids-rich shale business in the Bakken, Eagle Ford and
But Marathon said on Monday it did not get an acceptable
offer for its smaller UK business. The UK operation produced
15,000 barrels of liquid hydrocarbons a day and 32 million cubic
feet of gas per day last year.
Under the deal, Det norske, controlled by billionaire Kjell
Inge Roekke, will get stakes in 13 fields, increasing its output
by around 20 times. It has also secured the financing needed to
pay for its share of the $20 billion Johan Sverdrup project, the
biggest North Sea oil find in decades.
"This will actually transform Det norske from a pure play
exploration and development (company) to a full-fledged
exploration and production company in one go," Chief Executive
Karl Johnny Hersvik said.
At $2.7 billion including debt, the deal is nearly twice as
big as Det norske's market capitalisation and will make the firm
the biggest independent oil producer in Norway, where the
industry is dominated by state-owned Statoil.
The assets Det norske is buying from Marathon produced
80,000 barrels of oil equivalents (boe) per day last year while
Det norske's own output was just over 4,000 boe per day.
Analysts said Det norske was paying a full price for the
assets but this was justified because the fields it is buying
are producing and generating cash, allowing Det to make use of
tax relief on its investments.
"It is a bit expensive," Christian Yggeseth, an analyst at
Oslo-based Arctic Securities, said. "In our view they are
overpaying by $150 million versus our evaluation."
"The reason why they can justify a higher price is on the
back of them having large tax balances ahead of first oil on the
Ivar Aasen field and Johan Sverdrup, which they are now thinking
of utilising much more efficiently."
CEO Hersvik said he did not believe the company had paid too
much. "All of our investments had to be funded on a pre-tax
basis and the company would have built up a significant tax loss
... before Johan Sverdrup came onstream."
The deal, which includes a bank loan and a share issue worth
$500 million, also secures cashflow until Sverdup comes
onstream, removing a major uncertainty surrounding the stock.
Det norske shares jumped nearly 10 percent in early trade
and were up 5.8 percent at 0900 GMT, outperforming a 0.4 percent
rise in the broader market.
Analysts at Pareto Securities said Det norske shares could
rise further because they now trade at 0.75 times its net asset
value, below a valuation of 0.85-0.90 for Lundin Petroleum
, another big independent player and the firm's partner
in several projects, including Sverdrup.
"If Det norske should price on similar multiples as Lundin
Petroleum post transaction, there could be room for some 10-20
percent uplift in the share price," Pareto said.
To pay for the deal, Det norske has already secured a loan
and was also in talks with four banks over a seven-year, $2.75
billion loan. It would also issue $500 million worth of shares
in a fully-underwritten rights issue, with Aker ASA,
its biggest shareholder, agreeing to subscribe for 49.99 percent
of the new shares.
The loan is provided by BNP Paribas, DNB,
Nordea and SEB.
Parners in the Johan Sverdrup field include Statoil, Lundin,
and Maersk Oil a unit of Danish shipping and oil group A.P.
Det norske was advised by J.P. Morgan while Scotia
Waterous advised Marathon.
(Additional reporting Henrik Stolen and Gwladys Fouche. Editing
by Jane Merriman)