The closing of OKEA’s acquisition of a 28 percent working interest in PL037, or the Statfjord Area, from Equinor Energy AS for an initial fixed consideration of $220 million has been postponed from the original target completion date of November 30.
OKEA said in a statement that it received updated information that indicated a reduction in 2P and 2C volumes of 10 to 15 percent over the lifetime of the acquired assets compared to the 2023 revised national budget, which is a required report by all oil companies to the Norwegian Petroleum Directorate. The updated information also implies an increase in costs, the company added.
Preliminary assessments of the updated projections “indicate a material reduction in fair value”, OKEA said, noting that “a significant impairment may therefore likely be required following completion of the acquisition”. The company said it is in discussions with Equinor regarding the next steps to be taken.
In March, OKEA announced it was acquiring a 28 percent working interest in PL037, composed of a 23.93123 percent working interest in Statfjord Unit, a 28 percent working interest in Statfjord Nord, a 14 percent working interest in Statfjord Øst Unit, and a 15.4 percent WI in Sygna Unit. The effective date of the acquisition is January 1, 2023, and the transaction consideration of $220 million includes tax balances of approximately $28 million (NOK 300 million), according to an earlier statement.
In addition to the fixed consideration, the agreement contains “a contingent consideration structure based on profit sharing on crude oil volumes sold at a realized price of 75–96 USD/bbl in 2023, 64–85 USD/bbl in 2024, and 53–72 USD/bbl in 2025, as well as on dry gas volumes sold at a realized price of 170-341 p/th in 2023, 125–248 p/th in 2024, and 37–75 p/th in 2025”, OKEA said in the statement.
The profit sharing within the limits is 90 percent after tax to Equinor and 10 percent to OKEA. “For realized prices on crude oil above 96 USD/bbl in 2023 and 85 USD/bbl in 2024 and realized prices on dry gas above 341 p/th in 2023 and 248 p/th in 2024 the profit sharing is on 50/50 after tax basis. OKEA keeps 100 percent of realised oil prices above 72 USD/bbl and gas prices above 75 p/th in 2025”, OKEA said.
Originally, the assets were estimated to have net 2P reserves of 41 million barrels of oil equivalent (MMboe) and net 2C resources of 8 MMboe. Additional upside volume potential was estimated to be 14 MMboe, identified by OKEA based on drilling beyond 2028 and cost reduction initiatives. The acquisition was targeted to add 2023 production of 13,000 to 15,000 barrels of oil equivalent per day (boepd) and expected to grow to 16,000 to 20,000 boepd in 2024.
According to the transaction agreement, Equinor will retain responsibility for 100 percent of OKEA’s share of total decommissioning costs related to Statfjord A, while OKEA will be liable for its share of decommissioning costs related to Statfjord B and C. Equinor will retain responsibility for any decommissioning costs relating to a full or partial removal of the gravity-based structures, if required. OKEA will pay Equinor $48 million in 2028 as decommissioning security, which will be repaid to OKEA at 4 percent per annum real interest until abandonment is completed, the statement said.
OKEA said that no new financing is required for funding the transaction, as the majority of the purchase price, based on current forward prices, will be covered by cash flows generated by the assets prior to completion.
The Statfjord Area is one of the largest fields on the Norwegian Continental Shelf in terms of initial oil in place, which was in excess of 6 billion barrels, according to the release. The Statfjord Area comprises the Statfjord Unit, Statfjord Øst Unit, Statfjord Nord and Sygna Unit. The Statfjord Unit development covers the Statfjord A, B and C concrete gravity-based platforms. The other fields are subsea developments tied back to the main field platforms.
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