Lundin Petroleum AB intends to spin-off its Norwegian and UK businesses into a newly formed Norwegian company called Viking Oil and Gas ASA (Viking).
Transaction Proposed Structure
Lundin Petroleum intends to launch an initial public offering (IPO) of the Viking shares and to seek a listing of the Viking shares on the Oslo Stock Exchange (OSE). Viking is currently a wholly-owned subsidiary of Lundin Petroleum. Through the IPO Lundin Petroleum proposes to offer 50.01 percent of the Viking shares to the public at a price to be determined and retain a substantial shareholding, 49.99 percent, in Viking. The IPO is expected to be completed before the end of the second quarter of 2007.
It is the intention of Lundin Petroleum to distribute the majority of the proceeds of the sale of its shareholding in Viking to shareholders. The timing and the form of this distribution will depend on the size and timing of the IPO. Viking will not receive any proceeds from the IPO.
As previously announced to shareholders, Lundin Petroleum has been reviewing strategic options in relation to its Norwegian and UK assets with the objective of finding ways to potentially unlock Lundin Petroleum shareholder value. Lundin Petroleum believes that this proposed spin-off and IPO transaction, if completed, will crystallize the value of the Norwegian and UK business with its substantial reserves and resources base, high impact exploration portfolio and strong management teams.
Viking would become a new Norwegian independent oil and gas exploration and production company, well-positioned to take advantage of growth opportunities on the Norwegian and UK continental shelves (NCS and UKCS). Viking would offer investors a new vehicle with a balanced portfolio of producing, development and exploration assets in the North Sea as well as exploration assets in the Barents Sea. The assets to be held by Viking have strong operating cash flow to enable Viking to use its internally generated funds to finance its own growth via asset developments and exploration. Viking has an extensive inventory of potential developments, discoveries and prospects. We believe that the new company will be amongst the largest Norwegian independent oil and gas companies after Statoil/Norsk Hydro in terms of production and North Sea reserves.
Lundin Petroleum would continue to own and operate its remaining portfolio of international oil and gas assets with production in Tunisia, Russia, Indonesia, France and the Netherlands as well as a diverse portfolio of exploration assets. This spin-off and IPO transaction would downsize Lundin Petroleum with even stronger leverage to success in relation to its high potential exploration drilling program and new deal opportunities.
Viking will have its head office in Oslo, Norway, with an office in Aberdeen, UK. The CEO of Viking will be Torstein Sanness, the current Managing Director of Lundin Petroleum's NCS operations, and the COO of Viking will be Alan Curran, the current Managing Director of Lundin Petroleum's UKCS operations. Ashley Heppenstall, President and Chief Executive Officer of Lundin Petroleum, will be a non-executive director of Viking. As at 1 January 2007, a total of 96.6 million barrels of oil equivalent (mmboe) of net proved and probable reserves were attributed to the NCS and UKCS assets to be held by Viking as well as 99.4 mmboe of net contingent resources and 974 mmboe of net unrisked prospective resources. Forecast production from Viking assets in 2007 is greater than 20,000 boepd.
Ashley Heppenstall, President and CEO of Lundin Petroleum, comments:
"The spin-off of our Norwegian and UK assets into Viking will crystallize the underlying value of this business with its substantial resource base and organic growth potential. Lundin Petroleum will seek to continue to create value to shareholders through its proven strategy of exploration and deal making."
Torstein Sanness, President and CEO of Viking Oil and Gas, comments:
"We are very excited about the prospects for Viking. We start from a very strong production and resource base as well as a technical team with a proven track record of creating value. We have an exciting growth story – and we expect production to grow from existing projects to approximately 30,000 boepd as a result of the Alvheim development. Furthermore we have discoveries with the potential to further increase this to over 60,000 boepd. In addition our high impact exploration portfolio with secured rig capacity can have a significant impact on our reserve base."
The IPO and listing of the Viking shares on the OSE remains subject to a number of conditions, including government approval in Norway and the UK, approval of the shareholders of Lundin Petroleum at an extraordinary general meeting and approval of the OSE.
ABG Sundal Collier and Deutsche Bank have been appointed as Joint Bookrunners and Joint Global Co-ordinators, and DnB NOR, SEB Enskilda and Öhman as Co-Lead Managers in connection with the IPO.