October 14, 2015 / 11:27 AM / in 4 years

UPDATE 3-Russia's Fridman buys E.ON's Norway oil and gas assets

* Price higher than expected, E.ON shares rise 4.5 percent

* Transaction to close by end of the year - spokesman

* British exploration business still under review

* British assets seen worth 300-400 mln euros (Adds analyst comment, details on price, updates shares))

By Christoph Steitz

FRANKFURT, Oct 14 (Reuters) - Russian billionaire Mikhail Fridman has agreed to buy E.ON’s oil and gas assets in the Norwegian North Sea for $1.6 billion after his attempt to get a foothold in the British North Sea was blocked by the government.

Fridman’s LetterOne fund acquired the British fields as part of its takeover of RWE’s DEA oil and gas business in March, but was forced to sell them again as the West tightened sanctions against Moscow over its role in Ukraine.

LetterOne agreed last week to sell DEA’s British oil and gas assets to Swiss chemicals company Ineos, though Britain told him he was still welcome to invest in the country.

After Wednesday’s announcement that LetterOne had bought E.ON’s Norwegian oil and gas assets, Norway’s oil minister said he welcomed international investment and the application for approval of the deal would be handled “the usual way”.

Both statements will be viewed with relief by wealthy Russians, who have been watching Fridman’s struggle to invest in Britain with great anxiety.

Although the reassurances given to Fridman do not signal any major improvement in relations between the West and Moscow, they showed that Russian investments have not been banned entirely.

“This acquisition in Norway is a perfect fit to our renewed business strategy,” said DEA CEO Thomas Rappuhn, adding that the company would look for acquisitions in Europe and North Africa.

If approved, the deal will double DEA’s output in Norway to 75,000 barrels of oil equivalents per day (boe/d), another step in Fridman’s plan to create a serious oil and gas player.

The deal, which is also subject to European Commission approval, is expected to close by the end of 2015, E.ON said.

REASONABLE VALUATION

Traders and analysts hailed the transaction price as coming in above market estimates of $1.35 billion and E.ON’s shares rose 4.5 percent, the biggest increase in Germany’s blue-chip index on Wednesday.

“The deal has been concluded in a depressed commodity environment and puts to bed investor concerns on whether E.ON would be able to exit its upstream business at a reasonable valuation,” said Deepa Venkateswaran, senior analyst at Bernstein Research.

The focus will now shift to E.ON’s British oil and gas assets, which are still under strategic review and expected to fetch about 300-400 million euros ($343-458 million).

E.ON is in the middle of a major corporate overhaul. It is planning to spin off its energy trading, oil and gas activities and most of its power generation next year into a new company called Uniper.

As part of the overhaul, E.ON put its North Sea oil and gas exploration and production activities (E&P) under review, hoping to rake in proceeds from a business where it lacks the critical mass to compete with large oil companies.

E.ON E&P Norge has stakes in 43 licences but most are exploration assets, only a handful are in production and none is operated by E.ON. Its main production fields include Njord, operated by Statoil and Skarv, operated by BP.

E.ON’s E&P business in Norway produced 16.35 million barrels of oil equivalents (mboe) in 2014, while its British division produced 6.02 mboe. ($1 = 0.8739 euros) (Additional reporting by Dmitry Zhdannikov in London, Maria Sheahan and Balazs Koranyi in Frankfurt and Stine Jacobsen in Oslo; editing by David Clarke)

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