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UPDATE 1-Tullow spends up to $670 mln on Norway deal, to exit UK
December 11, 2012 / 9:26 AM / 5 years ago

UPDATE 1-Tullow spends up to $670 mln on Norway deal, to exit UK

* To buy Spring Energy for $372.3 mln

* Deal could also include up to $300 mln bonus

* Says will divest gas assets in UK, Dutch North Sea

* Shares down 4 pct

LONDON, Dec 11 (Reuters) - Africa-focused Tullow Oil plans to buy a Norwegian oil explorer for up to $672 million and sell its North Sea gas assets as part of a strategy to chase oil-rich exploration in a prospective European market.

Britain’s Tullow said on Tuesday that it would pay $372.3 million plus a bonus payment of up to $300 million conditional upon exploration success to buy Spring Energy Norway AS from private equity firm HitecVision.

The company also said that it aimed to sell its gas fields in the British and Dutch North Sea by the end of 2013, in line with a strategy to focus on oil rather than gas.

The Norwegian acquisition is expected to buoy the company’s future exploration portfolio and bring greater visibility to a group that is known for the big finds it has made in countries such as Uganda and Kenya, where investors are wary of political risk.

“The Norwegian assets are a very good balance because it allows us to explore in Europe,” Chief Executive Aidan Heavey said in an interview with Reuters.

A string of big discoveries off the coast of Norway in the last two years, including the giant Johan Sverdrup field - 2011’s biggest find globally - have revived interest in the Norwegian North Sea, contrasting with fortunes off the coast of Britain, where new finds are fewer and tend to be small.

“The problem with the UK assets is they are just cash-flow and there is no real material needle-moving exploration available for us,” Heavey said.

Tullow said it appointed Jefferies to manage the sale of the Southern North Sea gas assets, which currently produce around 18,000 barrels of oil equivalent per day, and are valued at around $500 million by Barclays analysts.

Spring Energy comes with a portfolio including six commercial discoveries and with plans to drill an additional 16 exploration wells. Tullow said completion of the deal was subject to Norwegian authorities.


In a separate statement on Tuesday, Tullow said that a well it drilled off the coast of Ghana disappointed by not finding oil in its main target area, hurting its shares, which traded down 4.8 percent to 1,196 pence at 0907 GMT.

Investec analyst Stuart Joyner mostly attributed the share price fall to the unsuccessful drilling result in Ghana at the Okure-1 well, but said the acquisition could also be viewed slightly negatively.

“Generally the market isn’t liking acquisition in (the) exploration and production (sector) at the moment,” he said, calling the deal “logical” given management’s desire to push into that area.

“The view is that they’ve got quite a full opportunity set within the organic side of things.”

Also in Ghana, Tullow said that production at another part of its key Jubilee project had started, boosting production from the field to over 90,000 barrels of oil per day.

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