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Released November 10, 2016 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Denmark's DONG Energy A/S (Fredericia, Denmark) has announced plans to get out of the oil and gas business.
The company said that JP Morgan Chase (NYSE:JPM) has been appointed to review the assets and that going forward it will focus solely on offshore wind. Analysts have valued its oil and gas assets at more than $2 billion. DONG is currently Europe's largest offshore wind energy company. No deadline was given for the proposed divestment.
DONG's decision mirrors that of German energy giants RWE AG (FWB:RWE) (Essen, Germany) and E.ON SE (FWB:EOAN) (Düsseldorf), which have split their energy businesses into separate companies. For additional information, see September 5, 2016, article - E.ON to List Power Spin-off 'Uniper' on September 12 and October 16, 2016 article - RWE Spins-Off 'innogy' in $22 Billion Listing.
"We have decided to initiate a process with the aim of ultimately exiting from our oil and gas business," explained Henrik Poulsen, DONG chief executive officer and president. "This should be seen in the context of DONG Energy's strategic transformation towards becoming a global leader in renewables and a wish to ensure the best possible long-term development opportunities for our oil and gas (O&G) business. There can be no assurance as to the outcome or the timing of the completion of the process."
He added: "O&G continues the substantial restructuring of the business and delivered a strong operational performance in the first nine months. Cost performance continues to improve, driven by continued renegotiation of supplier contracts, reduced exploration spending and improved operational efficiency, with total cash spend decreasing by 36% compared with the same period last year. We now expect O&G to be cash flow positive in 2016, a year earlier than previously communicated."
Looking ahead Poulsen said: "We want to get to the right transaction that obviously provides value to shareholders and provides the oil and gas business with the right long-term opportunities. We are still in a very early stage of exploring market interest, but it is our impression that there is interest in an asset of this kind."
In 2015, DONG's daily production of oil and gas was 115,000 barrels, of which 90% came from Norwegian fields and 10% from Danish fields. That has dropped this year to an average of 85,000 barrels per day. The company's oil and gas activities are focused in the waters around Denmark, Norway, the U.K. (West of Shetland) and the Faroe Islands.
In August, Industrial Info reported that the U.K. government had granted planning consent for the 1.8-gigawatt (GW) Hornsea Project Two offshore windfarm project, being developed by DONG off the Yorkshire coast. As the world's largest planned offshore wind project, it will cost around £6 billion ($7.8 billion) to construct and be capable of generating enough power for 1.6 million homes. For additional information, see August 19, 2016, article--U.K. Green Lights World's Largest Offshore Windfarm.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
The company said that JP Morgan Chase (NYSE:JPM) has been appointed to review the assets and that going forward it will focus solely on offshore wind. Analysts have valued its oil and gas assets at more than $2 billion. DONG is currently Europe's largest offshore wind energy company. No deadline was given for the proposed divestment.
DONG's decision mirrors that of German energy giants RWE AG (FWB:RWE) (Essen, Germany) and E.ON SE (FWB:EOAN) (Düsseldorf), which have split their energy businesses into separate companies. For additional information, see September 5, 2016, article - E.ON to List Power Spin-off 'Uniper' on September 12 and October 16, 2016 article - RWE Spins-Off 'innogy' in $22 Billion Listing.
"We have decided to initiate a process with the aim of ultimately exiting from our oil and gas business," explained Henrik Poulsen, DONG chief executive officer and president. "This should be seen in the context of DONG Energy's strategic transformation towards becoming a global leader in renewables and a wish to ensure the best possible long-term development opportunities for our oil and gas (O&G) business. There can be no assurance as to the outcome or the timing of the completion of the process."
He added: "O&G continues the substantial restructuring of the business and delivered a strong operational performance in the first nine months. Cost performance continues to improve, driven by continued renegotiation of supplier contracts, reduced exploration spending and improved operational efficiency, with total cash spend decreasing by 36% compared with the same period last year. We now expect O&G to be cash flow positive in 2016, a year earlier than previously communicated."
Looking ahead Poulsen said: "We want to get to the right transaction that obviously provides value to shareholders and provides the oil and gas business with the right long-term opportunities. We are still in a very early stage of exploring market interest, but it is our impression that there is interest in an asset of this kind."
In 2015, DONG's daily production of oil and gas was 115,000 barrels, of which 90% came from Norwegian fields and 10% from Danish fields. That has dropped this year to an average of 85,000 barrels per day. The company's oil and gas activities are focused in the waters around Denmark, Norway, the U.K. (West of Shetland) and the Faroe Islands.
In August, Industrial Info reported that the U.K. government had granted planning consent for the 1.8-gigawatt (GW) Hornsea Project Two offshore windfarm project, being developed by DONG off the Yorkshire coast. As the world's largest planned offshore wind project, it will cost around £6 billion ($7.8 billion) to construct and be capable of generating enough power for 1.6 million homes. For additional information, see August 19, 2016, article--U.K. Green Lights World's Largest Offshore Windfarm.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
