Norwegian Energy Company ASA's wholly owned subsidiary, Altinex AS has entered into an agreement to acquire Royal Dutch Shell Plc’s upstream assets in Denmark. Through the transaction, Noreco becomes the second largest oil and gas producer in Denmark and a considerable E&P company.

Establishing Noreco as a considerable independent E&P company 

This acquisition will establish Noreco as an E&P company on the Danish Continental Shelf (“DCS”), and position it as the second largest oil and gas producer in the country. Noreco will post completion have a 36.8% non-operated interest in the Danish Underground Consortium (“DUC”) with assets that comprise 15 fields in four producing hubs; Halfdan, Tyra, Gorm and Dan. DUC is a joint venture between Total (31.2%), Shell (36.8%), Chevron (12.0%) and Nordsøfonden (20.0%) cooperating to recover oil from the Sole Concession holder’s area of the Danish North Sea. Total recently announced the acquisition of Chevron’s (12.0%) interest, which remains subject to approval of partners and relevant authorities. The Sole Concession covers 1,635.7 km² of the DCS. DUC is operated by Total which has extensive offshore experience in the region and worldwide. 

The transaction will be structured as a sale to Altinex of all shares in Shell Olie- Og Gasudvinding Danmark B.V. (“SOGU”), which in turn owns a 36.8% interest in DUC and a 100% interest in Shell Olie- Og Gasudvinding Denmark Pipelines ApS (“SOGUP”), which will own a proportionate interest in the F3 gas pipeline.

Included in the transaction are proven and probable (2P) reserves of 209 million barrels of oil equivalent (mmboe) based on an independent CPR assessment as per year-end 2017, of which 65% are liquids. Further, Noreco estimates significant reserves and production growth coming from existing resources (discoveries, EOR initiatives & new projects). Shell’s share of production from DUC in 2017 was 67 thousand barrels of oil equivalent per day (mboepd). Noreco expects to maintain strong production in the years to come. The DUC portfolio has attractive economics, with 2017 opex of USD 13 per boe. As the Tyra hub is being redeveloped, the portfolio will be revitalised and offer improved economics accompanied by prolonged field life. Liquids production volumes are protected through a guarantee lasting from signing of the Acquisition through 2020. 

Local SOGU staff mostly dedicated to the DUC will pass to Noreco along with the business with their existing contracts of employment intact and full continuity of service. In total ca. 8 employees will follow from Shell, which will bring additional competences to the Noreco organisation. Following the transaction, Noreco will have 15 employees, and does not plan to make any organisational reductions. The SOGU organisation is based in Copenhagen, and Mr. Lee James Hodder serves as managing director. The Board of Directors of SOGU currently consists of Mr. Lee James Hodder and Mr. Michael Lund Jensen. 

Completion of the transaction is subject to: receipt of all mandatory consents, approvals and clearances from governmental authorities, including the Danish Energy Agency; that no party relevant to the joint operating agreements invokes option rights to purchase Shell’s SOGU interest; and other conditions customary for a transaction of this nature. 

Subject to fulfilment of applicable conditions, completion is targeted for H1 2019.

The consideration of the transaction is USD 1.9 billion with effective date as of 1 January 2017, with pro contra adjustment currently estimated by Noreco to USD 0.7 billion.