Centrica Merging Oil and Gas E&P Business with Bayerngas Norge

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Centrica plc (OTC:CPYYY) (Windsor, England) has announced plans to merge its European oil and gas exploration and production (E&P) business with Norway's Bayerngas Norge AS (Oslo).

The company, which has been trying to move away from traditional E&P, said the merger will help focus its E&P efforts while allowing it to focus on other key markets such as energy supply. The new joint venture company will be 69% controlled by Centrica and combine its assets in the U.K., the Netherlands, and Norway with Bayerngas Norge's assets in the U.K., Norway, and Denmark. It claimed that the deal "will create a strong and sustainable European E&P business by combining Centrica's cash-generative and relatively near-term production profile with Bayerngas Norge's more recently on-stream producing assets and development portfolio." Centrica said the new company will lead to savings of up to £150 million ($195 million) after the deal concludes at the end of the year.

"As part of our strategy of 2015, we have been aiming to develop a more focused and stronger E&P business which will contribute to the resilience of the Group while limiting Centrica's E&P participation," explained Iain Conn, group chief executive of Centrica plc. "Alongside the recently announced disposals of our Canada and Trinidad & Tobago assets, this joint venture creates a larger, more sustainable and more capable European E&P business and brings together like-minded shareholders who have a shared strategic vision on the role of E&P."

He added: "As one of the largest independent E&P companies in Northwest Europe, the new entity will have the possibility to participate in further consolidation and joint ventures, and creates future options for Centrica's shareholders."

Florian Bieberbach, chief executive of Stadtwerke München, owner of Bayerngas Norge, said: "We are convinced that by combining our E&P activities we will create an even stronger and more sustainable business. With its similar background and strategy, Centrica is an ideal partner to develop and grow this joint venture together."

The joint venture had 2016 year-end 2P reserves of 409 million barrels of oil equivalent (mmboe), 2016 year-end 2C resources of 216 mmboe and expected combined 2017 production in the range 50-55mmboe from 27 producing fields. The portfolio will be gas-weighted, with approximately 66% of total reserves and resources comprising natural gas. It will have a mix of producing assets, development options and exploration licences, as well as one operated U.K. onshore terminal at Barrow-in-Furness.

Last month, Industrial Info reported that Centrica was shutting the U.K.'s largest gas storage facility at Rough off the Yorkshire coast due to "high operating pressures." Rough, which began operations in 1985, accounts for 70% of the country's gas storage capacity, and the U.K. has no plans in the works to replace the facility. For additional information, see June 26, 2017, article - Centrica Shutting Largest Gas Storage Facility in U.K..

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