The UK-based oil and gas services firm Petrofac and Sweden's Lundin Petroleum are to spin off their North Sea oil assets into a new venture to be floated on the London Stock Exchange.
The new company, to be called EnQuest, will be 45 per cent owned by Petrofac shareholders, with the balance held by Lundin shareholders.
The assets to be spun off are fields in the Norwegian and UK sectors of the North Sea. Together, the assets are thought to worth an estimated ┬ú669 million (Ôé¼736 million).
London-based PetrofacÔÇÖs operations in the North Sea are centred on the Don fields, midway between the Shetlands and Norway. It is the operator of the west Don field and also owns a 60 per cent stake in the south-west Don field. Peak production from both is expected to reach more than 40,000 barrels per day.
Stockholm-based LundinÔÇÖs operations focus on its Thistle, Heather and Broom fields in an area close to the Don fields. It already shares some infrastructure facilities with Petrofac. Combined production from LundinÔÇÖs UK and Norwegian assets was about 24,000 barrels of oil equivalent per day last year.
The deal is expected to be completed early in the second quarter of 2010 and will be subject to the approval of the UK government and Lundin shareholders.
Lundin has revised its net proven and probable reserves to 177 million barrels of oil equivalent as of 1 January 2010, down from 255.9 million, following the spin-off of its UK assets.
The company also expects its 2010 output to reduce to between 29,000 barrels of oil equivalent per day (boepd) and 33,000 boepd, down from 38,000 boepd and 44,000 boepd, assuming the transaction is completed at the end of March.
The downward revision is as a result of a nine-month loss in production in the UK, Lundin said.
Lundin attempted unsuccessfully to spin off its Norwegian and UK assets in 2007.
The value of shares in Petrofac, which supplies specialist engineering services to the oil and gas industry, more than trebled last year, thanks in part to its unusual business model.
The company takes equity stakes in the oil and gas projects on which it works, incentivising itself to maximise production on behalf of its clients. It is also known to use lower-cost engineers from non-Western countries.
Petrofac carries out most of its work in the Middle East and North Africa.
