* Deal gives Statoil $7 bln to fund new expansion
* OMV sees over $500 mln EBIT contribution from deal
* Reduces OMV's exposure to Middle East oil
* OMV gains 320 million barrels of oil equivalents
By Balazs Koranyi and Michael Shields
OSLO/VIENNA, Aug 19 Norway's Statoil
sold stakes in North Sea oil fields to Austria's OMV
on Monday, in a $2.65 billion deal giving the former cash to
develop new projects and placing the latter on course to meet
ambitious output targets.
The deal, which analysts said came at a comfortable premium,
gives OMV a foothold in one of Norway's top new developments and
underlines a rebound in North Sea investments driven by new
discoveries, high oil prices and better recovery technology.
Statoil sold minority stakes in the mature Gullfaks field,
the brand new Gudrun development, Chevron's Rosebank
field in the U.K and BP's Schiehallion field for $2.65
billion but the actual price will be higher to reflect capital
expenditure between January 1 and the closing of the deal.
It also agreed optional cooperation in 11 of Statoil's
exploration licences in the Norwegian North Sea, West of
Shetland and the Faroe Islands.
"This is a very good price: it's at two times book value
while Statoil itself trades at 1.3 times book value," said ABG
oil sector analyst John Olaisen. "It shows that Europeans are
positive about the Norwegian Continental Shelf."
The cash - in addition to funds earmarked for projects it
will no longer own - gives Statoil a sizeable budget to fund new
projects, push on with new exploration and appease investors
worried about soaring capital expenditure.
Statoil has been short of cash in recent years as it spends
heavily on the development of new discoveries in places like
Brazil, Norway and Tanzania - arguing that funding the
development risk there will ultimately offer a higher yield.
As a result Statoil's capital expenditure jumped to $19
billion this year from $13.7 billion in 2010 and its net cash
flow is expected to stay negative until 2015. The company's free
cash flow is expected to match its capital expenditure this
year, forcing it to raise money, in part through divestments, to
"The idea is to use the proceeds to reinvest in high-return
projects," Statoil Chief Executive Helge Lund said. "It will
increase our financial flexibility in the sense it releases $7
billion in future capital expenditure from these assets."
Shares in Statoil rose 0.6 percent on Monday while shares in
OMV were down 2.6 percent.
"This is a very nice price," said Trond Omdal, an oil sector
analyst with Arctic Securities in Oslo. Using the industry
standard of an 8 or 9 percent discount rate and basing his
calculation on the weighted cost of capital, he calculated that
the deal brought a 41 percent or 50 percent premium.
For OMV, in the process of exiting lower-margin downstream
operations to focus on more lucrative upstream business, the
deal gives that effort, cheered by analysts, a major push.
UBS analysts said the deal was "transformational" for OMV
and also highlighted how willing the industry was to pay a
premium to access strategic resources in Norway - a stable and
secure free market in the context of an industry increasingly
pushed to more hostile investment climates.
Although OMV produced only a fraction of its total output
from the Middle East and Caspian region in 2012 - 10 million
barrels out of a total 111 million - CEO Gerhard Roiss said on
Monday the reduction of its exposure to the region was "an
important dimension.. when you see what is happening today." OMV
has assets in Yemen and in Libya, where it suffered a major
production outage during that country's conflict.
OMV said it would finance the deal in part from its cash
flow and the proceeds from divesting petrol stations in the
Balkans, its lubricants business and a stockholding unit, as
well as from existing credit lines. It said it would need no
capital hike or fresh loans for the transaction and forecast the
new assets would contribute more than $500 million a year to
operating profit from 2014, assuming stable oil prices. OMV has
not given an operating profit target for 2014. Operating profit
in 2012 was 3.1 billion euros.
The deal lifts OMV's proven and probable reserves by about
320 million barrels of oil equivalents, or about 19 percent, and
will boost production by about 40,000 barrels in 2014 and almost
60,000 barrels in 2016.
That is enough to put it well on course to meet its 2016
target of lifting production to around 400,000 barrels a day
from 297,000 barrels in the second quarter.