Aker BP To Buy Lundin Energy Oil And Gas Business In $14B Deal

Aker BP To Buy Lundin Energy Oil And Gas Business In $14B Deal
Aker BP has decided to buy the oil and gas business of Lundin Energy, and form the largest listed E&P company focused exclusively on the Norwegian Continental Shelf.

Norwegian oil and gas company Aker BP has decided to buy the oil and gas business of Sweden's Lundin Energy, the largest listed E&P company focused exclusively on the Norwegian Continental Shelf (NCS).

Lundin Energy said that the two companies reached an agreement on a combination proposal to create a combined independent E&P company with “a world-class asset base, industry-leading operating costs, and low carbon emissions with increased and sustainable dividends.”

The completion of the merger proposal is conditional upon, among other things, the combination proposal being approved with a two-thirds majority vote at the general meetings of shareholders of Aker BP and Lundin Energy, respectively.

It also requires the receipt of necessary governmental clearances, including from competition authorities as well as from the Norwegian Ministry of Petroleum and Energy and the Norwegian Ministry of Finance. The completion is targeted in the second quarter of 2022.

“Already when we created Aker BP, a subsequent acquisition of Lundin Energy was a vision shared between BP and Aker. Today the vision has become a reality. We are seizing an opportunity that will make a difference for both Aker and Norway for decades to come,” Øyvind Eriksen, President and CEO of Aker, and Chairman of Aker BP, said.

“The combination of Aker BP and Lundin Energy’s Norwegian oil and gas business will create a world-scale independent oil and gas company with a leading position in very high-quality, resilient resources with best-in-class CO2 emissions intensity. As long-term investors in Aker BP, we are excited about the prospects for the newly enlarged company,” Bernard Looney, CEO of BP, added.

It is worth noting that Lundin’s board unanimously recommended to the shareholders to vote in favor of the merger at the 2022 AGM, as they believe it is the best opportunity to create long-term shareholder value.

Lundin Energy’s largest long-term shareholder, the Lundin family – represented by Nemesia, holds 33.39 percent of total shares, has signed an irrevocable undertaking to vote in favor of the combination proposal. Aker Capital and BP, who in aggregate control 64.99 percent of the shares and votes in Aker BP, will also irrevocably vote to support the combination proposal at the general meeting of shareholders of Aker BP.

The proposed combination of Lundin Energy’s E&P business and Aker BP has the strategic and value accretive benefits such as over 2.7 billion barrels of oil equivalent (boe) of reserves and resources with significant growth potential and ownership of 31.6 percent in the Equinor-operated Johan Sverdrup field, delivering 755 Mbopd gross on plateau.

Aker BP on steroids

The merged company will be positioned as the undisputed number two on the NCS, with a combined oil and gas production of above 400,000 barrels of oil equivalents per day and a resource base estimated to 2.7 billion barrels of oil equivalents.

Once Aker BP increases with the buy, it will be the operator of six major production hubs and the second-largest owner of the giant Johan Sverdrup oil field.

Following the completion of the combination proposal, the shareholders of Lundin Energy will hold 43 percent of the total number of shares and votes of Aker BP. Aker is the main shareholder in Aker BP with a 37.14 percent ownership, held through its wholly-owned subsidiary Aker Capital.

After the merger is completed, Aker BP will be jointly owned by Aker (21.2 percent), BP (15.9 percent), Nemesia (14.4 percent), and other Aker BP and Lundin Energy shareholders (48.6 percent).

The transaction will be settled through a cash consideration of $2.22 billion and a share consideration of 271.91 million new shares issued from Aker BP and distributed to the Lundin Energy shareholders.

The cash and stock transaction values the acquired assets at approximately 125 billion Norwegian crowns ($13.9 billion).

Leadership

Following the merger, Aker BP’s executive management team will run the combined company. Lundin’s executive management team will remain available to the combined company for three months after completion of the transaction to ensure an orderly transition. All personnel of Lundin Energy’s oil and gas assets in Norway will remain employed by Aker BP upon completion.

“Ashley Heppenstall is joining as a new Lundin-nominated board member. We are looking forward to a long-term collaboration with both BP and Lundin based on a shared ambition of developing and positioning the enlarged Aker BP as the E&P company of the future. Our strengths remain an excellent workforce, low production cost, low emissions, high growth, a strong balance sheet, and an attractive dividend policy,” Eriksen added.

Apart from all of this, Aker BP proposed to increase its current quarterly dividend by 14 percent to $0.475 per share from January 2022 and will continue to pay this increased dividend after completion, with the ambition to increase by a minimum of 5 percent per annum from 2023 onwards.

To contact the author, email bojan.lepic@rigzone.com


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