Aker BP Pays $2bn for Hess Norge
Aker BP said October 24 it has agreed to buy Hess's Norwegian upstream for $2bn cash, making it the sole owner of the Valhall and Hod oil fields.
US Hess has also begun a process to complete divestment its interests in Denmark, primarily a majority interest in the South Arne oil and gas field.
Cash consideration of the Norwegian deal is $2bn. It includes Hess Norge’s interests in Valhall (64.05%) and Hod (62.5%) fields, both already Aker BP-operated. Aker BP will also assume Hess Norge’s tax positions, which include a tax loss carry forward, with a net nominal after–tax value of $1.5bn. Aker BP said it would subsequently seek to sell or swap a minority interest in the fields to partners who want to work it to "proactively target the upside potential in the area." Most production from the two fields is liquids, but there is some associated gas.
Included in the Norwegian transaction are proven and probable (2P) reserves of 150mn barrels of oil equivalent (mn boe) and best estimate 2C contingent resources of 195mn boe, based on Aker BP’s own assessment per year-end 2016, of which 85% is liquids. During the first nine months of 2017, Hess Norge’s share of production from the Valhall and Hod fields was roughly 24,000 boe/d. The deal requires regulatory approvals.
Hess CEO John Hess said: “We are focusing our portfolio on higher return assets and reducing our breakeven oil price. Proceeds from these asset sales, along with cash on the balance sheet, will pre-fund development of our world class investment opportunity in offshore Guyana."
Hess said the sale of its interests in Norway, plus its previous divestments in the US Permian Basin and Equatorial Guinea, also announced October 24, will have captured $3.25bn of cash proceeds year to date, and that such restructuring – including its planned sale of Danish interests – would "extinguish approximately $3.2bn in future abandonment liabilities". It expects to reduce Hess debt by $500mn in 2018, in part by using a portion of the cash proceeds from these sales.
Hess holds a 61.5% interest in the South Arne gasfield, which produced 11,000 boe/d net to Hess in Jan-June this year.
Early January 2017, Valhall and Hod passed 1bn boe produced, more than three times what was expected at the opening of the field in 1982, according to Aker BP, which added that "the ambition is to produce a further 500mn boe."
Aker BP is planning to submit a plan for development and pperation for the Valhall Flank West project in late 2017, with estimated first oil in 2020.
Update October 25: Hess reported a net loss of $624mn in 3Q2017, approaching double its net 3Q2016 loss of $339mn. But on an adjusted basis, its 3Q2017 net loss of $324mn was slightly down on the year-ago quarter's net loss of $340mn reflecting higher oil prices and lower exploration expenses. Net production, excluding Libya, was 299,000 barrels of oil equivalent/day in 3Q2017 -- lower than the year-ago quarter's 314,000 boe/d.
Mark Smedley