Tullow Oil plc (“Tullow”) announces today that it has entered into an agreement to acquire Spring Energy Norway AS (“Spring”), a Norwegian exploration company, for a purchase price of $372.3 million which will be adjusted for working capital. The purchase has an effective date of 1 September 2012. Tullow is also announcing today that it intends to begin a process to dispose of its exploration, development and production assets in the UK and Dutch Southern North Sea (“SNS”) gas basin. These two transactions follow Tullow’s strategy of active portfolio management and monetisation of non-core assets and will enhance the Group’s considerable oil exploration portfolio.
A conference call hosted by Tullow Executives will be held at 0800hrs UK time today. Details can be found at the bottom of this release.
Acquisition of Spring Energy
Spring is a Norwegian oil exploration company which holds 28 offshore licences across Norway’s continental shelf in North, Norwegian and Barents Seas covering just over 18,000 sq km. Spring is a very successful oil explorer having made six commercial discoveries out of 12 wells drilled since 2008. In 2013-14, Spring currently has plans to drill up to 16 exploration wells of which three are operated. Tullow’s assessment of Spring’s exploration portfolio is that it contains in excess of 230 mmboe of risked prospective resources and has existing reserves and resources of 24 mmboe. The vendors of Spring are HitecVision, a private equity company (87.6%) and other shareholders (12.4%) including some current Spring staff.
Spring has an experienced team of 37 people based in Oslo who have a successful track record of finding and monetising Norwegian oil discoveries. The Spring team will form the basis of Tullow Norge AS. Spring’s Chief Executive, Roar Tessem, becomes Managing Director of Tullow Norge and will be responsible for managing Tullow’s assets offshore Norway and Greenland.
Following Tullow’s pre-qualification as an Operator on the Norwegian Continental Shelf earlier this year, the acquisition of Spring enables us to rapidly build a strong platform for future growth in Norway. In common with Tullow, Spring recently applied for licences in Norway’s 22nd licence round.
In addition to the purchase price, a bonus payment has also been agreed with the vendors in the event of commercial exploration success. This payment is limited to four specific prospects and will be paid on a sliding scale up to a maximum of $150 million per prospect and $300 million in aggregate. This acquisition remains subject to approval from the Norwegian Ministries of Energy and Finance.
Disposal of UK and Dutch SNS gas assets
Tullow is also announcing today that it intends to begin a process to divest its exploration, development and production assets in the UK and Dutch Southern North Sea. These gas assets currently produce approximately 18,000 barrels of oil equivalent per day. It is hoped that this process will be completed by the end of 2013.
The Southern North Sea business has been highly successful for Tullow and a key contributor to the Group’s growth over the past decade. However, following exploration and development success in Ghana, Kenya and Uganda, these assets are now non-core to the Group and no longer fit within Tullow’s light oil focused portfolio.
Jeffries International Ltd have been appointed to manage the sale of these assets.