Tullow Buys Spring
Purchase of Oslo-based upstream independent company with 28 offshore licenses.
London-based Tullow Oil Plc plans to buy Spring Energy Norway AS, a Norwegian exploration company, for about $372.3 million.
Spring is an Oslo-based oil exploration company which holds 28 offshore licenses across Norway’s continental shelf in North, Norwegian and Barents Seas covering just over 18,000 square kilometers.
Spring has made six commercial discoveries out of 12 wells drilled since 2008. In 2013-14, Spring plans to drill up to 16 exploration wells, three of which are operated. Tullow’s assessment of Spring’s exploration portfolio is that it contains in excess of 230 million barrels of oil equivalent (BOE) of risked prospective resources and has existing reserves and resources of 24 million BOE.
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, Tullow plans to grow its operations in Norway. In common with Tullow, Spring recently applied for licences in Norway’s 22nd license 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.
The vendors of Spring are HitecVision, a private equity company (87.6%) and other shareholders (12.4%) including some current Spring staff. The purchase has an effective date of Sept. 1.
Meanwhile, Tullow plans to sell its exploration, development and production assets in the UK and Dutch Southern North Sea (“SNS”) gas basin as part of its strategy to sell non-core assets before the end of 2013. These gas assets currently produce approximately 18,000 BOE per day.
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.
Aidan Heavey, chief executive of Tullow Oil Plc, said, “Active portfolio management is a key part of Tullow’s exploration-led strategy. These transactions are part of an ongoing process of carefully refocusing our business and ensuring efficient allocation of capital by monetizing non-core assets and re-investing the proceeds in high potential oil exploration. Our Southern North Sea gas assets are therefore no longer core to Tullow’s business which has a clear focus on light oil in Africa and the Atlantic Margins. The acquisition of Spring adds a material portfolio of oil exploration assets and high quality people that will provide a superb foundation for building our portfolio and expertise in the highly prospective North Atlantic.”