Dong to Keep E&P Arm Ahead of IPO

Danish utility Dong Energy has confirmed that it will retain its exploration and production (E&P) operations ahead of a planned initial public offering. Dong committed to undertake a review of its E&P operations following its announcement of its IPO roadmap on 18 September 2015.

In a press release January 26, Dong said that following that review, it had decided to retain the E&P operations. However, it also said that any cash flow derived from those operations would now be used to fund, in part, the company’s investments in renewable energy.

Dong has a strong portfolio of oil and gas assets, in the UK, Denmark and Norway. The assets include eight stakes in producing oil and gas fields on the Norwegian Continental Shelf, including the Ormen Lange field, which has been producing since 2007. The company also has interests in 14 licences in the North Sea, and is the operator of 10 of those.

In the announcement, Dong also acknowledged the challenging market for hydrocarbon explorers and producers.

"In line with the rest of the industry, E&P needs to adapt to the significant decline in oil and gas prices," the press release said. "Actions are being undertaken to de-risk the E&P portfolio and focus on cash generation within the new market reality."

Additionally, the company said it would be taking a write-down of DKr16bn (€2.14bn) in the carrying value of the E&P business in its 2015 annual accounts. "The write-down is caused by the continued decline in oil and gas prices, reduced reserve estimates as well as project-specific factors, in particular with regard to the Hejre project which continues to face significant challenges," it said.

The company has begun to turn its focus toward other energy types, with a focus on "green" energies. They include offshore wind and bioenergy.

Erica Mills