November 8, 2016 / 6:15 PM / 3 years ago

OMV sells UK business in retreat from costly exploration

The logo of Austrian oil and gas group OMV is pictured at its headquarters in Vienna, Austria, January 21, 2016. REUTERS/Heinz-Peter Bader/File Photo

VIENNA (Reuters) - OMV said it is selling its UK business to Siccar Point Energy for up to $1 billion, putting an end to the Austrian oil and gas group’s exploration activities in Britain as it seeks to escape high costs in areas such as the North Sea.

The firm’s Chief Executive Rainer Seele is unwinding a strategy set by his predecessor, who bought North Sea assets in 2013 for $2.65 billion, by shifting OMV’s focus from output growth to cutting costs and cash generation.

Tuesday’s deal is expected to close in the first quarter of next year, but would be effective from Jan. 1 this year.

The transaction, which is pending regulatory approval, would at current exchange rates shave 350 million euros ($386 million) off OMV’s overall earnings before interest and tax to reflect lost revenues in 2016, OMV said.

OMV is due to report third-quarter results on Wednesday, but it was unclear when the impairment would be booked.

Under the terms of the deal, Britain’s Siccar will pay OMV $750 million in cash and a further $125 million once a long-awaited final investment decision is made on the Chevron-operated Rosebank field.

It will also get a further $125 million for investments it has already paid for in Britain this year if the deal goes through.

As part of Seele’s strategy shift, OMV is placing its bets on swapping a stake in its Norwegian unit with Russia’s Gazprom for a stake in a low-cost Siberian gas field, although the deal is taking longer than expected.

Reporting by Shadia Nasralla; Editing by David Evans and Alexander Smith

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