Ineos To Buy Dong's E&P for $1.05bn

Denmark’s Dong Energy said May 24 it is selling its entire upstream business to UK-based Ineos for $1.05bn, plus $250mn in contingent payments. Most of the current production being transferred is gas produced in Norway and the UK.

Ineos, a chemicals group run by Jim Ratcliffe (pictured, below), said the deal will mean it becomes the biggest privately-held (ie not quoted) enterprise operating in the North Sea. “Dong’s oil and gas business is a natural fit for Ineos as we continue to grow our upstream activities,” said Ratcliffe.

The transaction involves long-life assets producing 100,000 barrels of oil equivalent/day in 2016 and with around 570mn boe of commercial and potential oil & gas reserves. Production is split 70% from Norwegian fields – primarily a 14% stake in the Ormen Lange gas field -- while 15% comes from Denmark, and 15% from UK West of Shetland fields – including a 20% interest in Total's Laggan-Tormore gas field.

Ineos chairman Jim Ratcliffe (Photo credit: Ineos)

Ormen Lange is the largest field in the Dong E&P portfolio and second largest gas field in Norwegian waters, while the Laggan-Tormore came onstream early 2016, and Syd Arne is a Danish oil field.

Several fields under development are also included, such as Edradour and Glenlivet gasfields near Laggan, and the Danish oilfields Nini, Nini East, Cecilie and Lulita. In total, the Dong E&P business has 50 licences in Denmark, Norway and the UK

The $250mn contingent payment, payable from 2018 to 2020, relates to $150mn for the Fredericia stabilisation plant and a contingent payment of up to $100mn subject to the development of the Rosebank field.  

Dong said, unless oil and gas prices were not too low, development of the Chevron-operated Rosebank oil field was a strong possibility.

Ineos said the acquisition was a good fit, following its recently announced plan to acquire the Forties Pipeline System from BP (pending regulatory and third party approvals), and its 2015 acquisition of both DEA’s and Fairfield’s UK portfolios. It also said the deal would let it significantly expand its trading and shipping activities.

Dong CEO Henrik Poulsen said: “Since the decision in 2016 to divest our upstream oil and gas business, we’ve actively worked to get the best transaction by selling the business as a whole, getting a good and fair price for it and ensuring the optimal conditions for the long-term development of the oil & gas business. With the agreement with Ineos we’ve obtained just that.”

Dong Energy Markets senior vice president Soren Scherfig said the divestment will not affect its gas trading activities: "We offer a reliable, responsible and flexible access to all relevant commodity wholesale gas markets."  The company will continue to offer gas storage and management services such as supply agreements, and adds that there are no changes to its LNG activities including its long-term capacity at Rotterdam's Gate terminal.  

Ineos director Tom Crotty told BBC Radio that the acquisition would bolster Ineos’s upstream, but provides added feedstock for the chemicals business to complement its current imports of US ethane to Ineos petrochemical plants in the UK (Grangemouth) and Norway.

Ineos recently moved its corporate headquarters from Switzerland to Knightsbridge, London.

Mark Smedley