Altinex Acquires Denerco Oil for DKK2.2 Billion

Altinex ASA

Altinex ASA has acquired the Danish company Denerco Oil A/S for DKK 2.2 billion. The transaction significantly strengthens Altinex's position as a mid-sized oil company in the North Sea. The combined company has a daily oil production of 12,500 boepd and holds considerable oil reserves.

"This transaction represents a quantum leap in the development of Altinex. With production from 6 fields, several interesting discoveries and promising exploration projects in the portfolio, this acquisition provides a series of opportunities for our organisation," said Brian Jepsen, Chairman of Altinex.

Denerco Oil is a privately owned upstream Danish oil and gas company founded in 1985, headquartered in Copenhagen and with activities in the Danish, German, Dutch and UK sectors of the North Sea as well as onshore Oman.

The Denerco Oil organisation employs 26 highly skilled people and has over the years had an above-average exploration success rate. Joined with the Altinex Oil organisation the combined company will be well positioned to undertake further exploration- and production projects. The company is today operator in both Germany and the Netherlands. When the Danish 6th round licenses are officially granted later this month, Denerco Oil will also become operator in Denmark.

Denerco Oil holds equities in five producing oil and gas fields in the Danish North Sea. These oil and gas fields are; South Arne, Siri, Nini, Cecilie and Lulita with a daily production in the range of 9500 boepd and all operating within a favourable Danish tax regime.

The proved and probable (P1 + P2) reserves in the producing fields are evaluated to approximately 20 mmboe with an additional upside (P3) of some 6 mmboe. The reserve figures have been audited by the renowned and independent reservoir-evaluation company DeGolyer and MacNaughton in February 2006.

In addition to the five producing oil and gas fields, Denerco Oil has interests in three oil and gas discoveries with an estimated 37 mmboe of net reserves. A plan for the development of one of these discoveries has been submitted to the Danish authorities.

Denerco Oil also has a considerable exploration portfolio consisting of 7 licenses in Denmark, 2 in Germany, 2 in Holland, 1 in UK and 1 in Oman. An additional 2 licenses will be granted shortly as a result of the 6th Danish concession round. Total estimated net reserves in exploration prospects are evaluated to 156 mmboe unrisked (48 mmboe risked). The company has secured rig-capacity for the coming years to complete the necessary work programs in a number of the exploration licenses.

The combination of the Altinex portfolio, consisting of nine Norwegian licenses (including the Brage field producing in the range of 3200 boepd) and Denerco Oil's assets will create a well balanced portfolio of production, development and exploration projects with low political risk. This will form a solid basis for long-term activity and further growth.

"This deal is a breakthrough in our strategy of building a stronger Altinex. In addition to broadening our portfolio of licenses, Denerco Oil contributes a strong team of subsurface specialists which is essential in order to exploit and develop the international asset base we have acquired," said Olaf Ellingsen, President of Altinex ASA.

The purchase price for Denerco Oil is DKK 2.2 billion of which DKK 200 million can be settled in the form of Altinex shares or cash consideration at the option of Altinex. The price represents USD 18.0/boe for proved and probable reserves and USD 3.25/boe for total reserves (fields, discoveries and risked exploration prospects).

The estimated impact to Altinex 2006 financials, at an oil price of USD 60/bbl, is a revenue increase of approximately NOK 1 360 millions and an EBITDA increase of approximately NOK 1 150 million. The Danish corporate tax is 28 %.

The purchase price is fully financed with funds coming from reserve-based lending (loan agreement entered into), treasury cash, and a guarantee for full subscription of a bond offering and a share offering issued by companies controlled by Oystein Spetalen, Idar Vollvik and Petter Stordalen for the amount of NOK 1,005 million.

The guarantee will be replaced by funds from a planned bond issue, expected to amount to approximately NOK 660 million, and a share issue. The board of Altinex ASA will within a short period of time decide whether the share issue will be conducted in the form of (i) a rights offering with transferable subscription rights issued to current shareholders, (ii) a public share offering or (iii) a directed share issue. This decision will be made consulting our financial advisors SEB Enskilda, Pareto and Handelsbanken.

To reduce the risk and protect against a fall in oil prices going forward, a three-year hedging program with a minimum oil price of $ 50/bbl through the use of put options will be established.

The acquisition of Denerco Oil is subject to approval by the regulatory authorities.