Shell agrees to sell upstream assets in Denmark to Norwegian Energy Company

Royal Dutch Shell plc (Shell), through its affiliate Shell Overseas Holdings Limited, has reached an agreement with publicly listed Norwegian Energy Company ASA (Noreco), to sell its shares in Shell Olie-og Gasudvinding Danmark B.V. (SOGU) for a consideration amount of $1.9 billion. SOGU is a wholly-owned Shell subsidiary that holds a 36.8% non-operating interest in the Danish Underground Consortium (DUC).

This acquisition will establish Noreco as an E&P company on the Danish Continental Shelf (DCS), and position it as the second largest oil and gas producer in the country. Noreco will post completion have a 36.8% non-operated interest in the Danish Underground Consortium (DUC) with assets that comprise 15 fields in four producing hubs; Halfdan, Tyra, Gorm and Dan.

DUC is a joint venture between Total (31.2%), Shell (36.8%), Chevron (12.0%) and Nordsøfonden (20.0%) cooperating to recover oil from the Sole Concession holder’s area of the Danish North Sea. Total recently announced the acquisition of Chevron’s (12.0%) interest, which remains subject to approval of partners and relevant authorities. The Sole Concession covers 1,635.7 km² of the DCS. DUC is operated by Total which has extensive offshore experience in the region and worldwide.

Included in the transaction are proven and probable (2P) reserves of 209 million barrels of oil equivalent (mmboe) based on an independent CPR assessment as per year-end 2017, of which 65% are liquids. Further, Noreco estimates significant reserves and production growth coming from existing resources (discoveries, EOR initiatives & new projects).

Shell’s share of production from DUC in 2017 was 67 thousand barrels of oil equivalent per day (mboepd). Noreco expects to maintain strong production in the years to come. The DUC portfolio has attractive economics, with 2017 opex of USD 13 per boe. As the Tyra hub is being redeveloped, the portfolio will be revitalised and offer improved economics accompanied by prolonged field life. Liquids production volumes are protected through a guarantee lasting from signing of the Acquisition through 2020.

Completion of the transaction is subject to: receipt of all mandatory consents, approvals and clearances from governmental authorities, including the Danish Energy Agency; that no party relevant to the joint operating agreements invokes option rights to purchase Shell’s SOGU interest; and other conditions customary for a transaction of this nature.

The transaction’s effective date is 1 January 2017.

ABG Sundal Collier ASA, Arctic Securities AS, BMO Capital Markets Ltd. and Jefferies are engaged as financial advisors to Noreco, ABG Sundal Collier ASA and Arctic Securities AS act as joint lead managers for the Private Placement, Convertible Bond, the Deposit Loan, and the Subsequent Offering. BAHR, CMS and Lundgrens act as legal advisors to the Noreco, PwC acts as tax advisor and Rystad Energy acts as strategic and commercial advisor.