Orlen to Acquire KUFPEC Norway for $445MM

The Orlen Group, through its subsidiary PGNiG Upstream Norway AS (PUN), is acquiring 100 percent of the shares of hydrocarbon producer KUFPEC Norway, a subsidiary of the Kuwait Foreign Petroleum Exploration Company, k.s.c.c., for $445 million.

Upon the closing of the transaction, Orlen’s natural gas production in Norway will increase by one-third to over 141.26 billion cubic feet (4 billion cubic meters) annually, the Polish oil company said in a news release Monday. Orlen also expects its daily production to surpass 100,000 barrels of oil (boe) by the end of 2024, enabling PUN to become the eighth largest company operating on the Norwegian Continental Shelf (NCS) in terms of annual hydrocarbon output. Orlen will hold 94 licenses on the NCS and will become the fifth largest license holder among companies operating in the area, according to the release.

The acquisition of KUFPEC Norway will expand the holdings of (PUN) in the fields of Gina Krog, Sleipner Vest, Sleipner Ost, Gungne and Utgard, in which Orlen is already active. The gas produced from these fields will be transported to Poland via the Baltic Pipe pipeline, Orlen said.

The transaction, scheduled to be finalized by the end of the year, is subject to approval by the Norwegian authorities. The purchase of KUFPEC Norway shares will be fully financed with funds generated by PUN from its operations on the Norwegian Continental Shelf, according to the release. The contract price includes the value of the acquired fields, as well as the value of the remaining assets of KUFPEC Norway AS, including “the significant cash balance”, Orlen said. Upon the closing of the transaction, PUN said it expects the value of cash in the acquired company to exceed $200 million.

Orlen expects the acquisition to increase the recoverable reserves within PUN’s portfolio to nearly 400 million boe. Over 80 percent of the new resources will consist of natural gas, which is in line with Orlen’s strategy to maximize gas production for supplying the Polish market and other countries in the region.

The newly acquired interests include a 30 percent stake in the Gina Krog field, boosting PUN’s interest in the field to over 41 percent. Orlen will also gain control of an interest in the Eirin gas field, scheduled for development via a tie-back to Gina Krog infrastructure, which will facilitate the rapid commencement of gas supplies from Eirin “while ensuring attractive profitability and low carbon emissions from production”, Orlen said.

“We have successfully concluded a strategic deal on the Norwegian Continental Shelf. With the acquisition of KUFPEC Norway, the ORLEN Group’s gas production in Norway is set to grow by more than 1 bcm [billion cubic meters] per year”, Orlen Management Board President and CEO Daniel Obajtek said. “This significantly enhances our capacity to meet the demand of the Polish market and the entire region utilizing our own gas resources. Beyond advancing the ORLEN Group’s strategic goals, this transaction brings synergies that boost our development potential in Norway. We have secured control of fields where we already hold direct interests acquired through previous transactions. This will ensure seamless integration of the acquired assets, optimization of operating costs and, by significantly scaling up our operations, access to attractive funding for further investments”.

This will be the second transaction completed by Orlen in Norway for the year. Earlier, PUN purchased interests in the Sabina and Adriana fields in the Skarv production area, estimated to hold reserves in the range of 38 million to 88 million boe. Between 2017 and 2022, the company completed 10 acquisitions, according to the release.

PUN is actively pursuing a program to further increase its hydrocarbon production. In June, the company and its license partners received Norwegian authority approvals for the development of eight fields. PUN’s share of the total reserves in those fields exceeds 100 million boe. In October, production began from the first production wells in the Tommeliten Alpha field, in which PUN holds more than a 42 percent interest. At peak production, the field is expected to provide the company with at least 17.66 billion cubic feet (0.5 billion cubic meters) of gas annually.

To contact the author, email rocky.teodoro@rigzone.com

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