Danish energy company DONG Energy has entered into an agreement to divest its upstream oil and gas business to chemicals company Ineos.
DONG informed on Tuesday that it agreed to divest the entire share capital of DONG E&P A/S to Ineos for an unconditional payment of $1.050 billion (DKK 7 billion) on a cash and debt free basis, a contingent payment of $150 million (DKK 1.0 billion) related to the Fredericia stabilization plant and a contingent payment of up to $100 million (DKK 0.7 billion) subject to the development of the Rosebank field, in the UK North Sea.
Ineos will, by acquiring DONG E&P A/S, take over decommissioning liabilities of approximately DKK 7 billion. DONG Energy will retain all cash flows until June 30, 2017 (free cash flow was DKK 2.1 billion in Q1, 2017) and retain all hedge contracts related to the oil & gas business (market value was DKK 1.9 billion as at March 31, 2017).
Earlier this year, Ineos also bought Forties Pipeline System (FPS) business, with assets including the main Forties offshore and onshore pipelines and other associated pipeline interests and facilities, from the UK oil giant BP.
Henrik Poulsen, CEO of DONG Energy, said: “Since the decision in 2016 to divest our upstream oil and gas business, we’ve actively worked to get the best transaction by selling the business as a whole, getting a good and fair price for it and ensuring the optimal conditions for the long-term development of the oil and gas business. With the agreement with Ineos we’ve obtained just that.”
“The transaction completes the transformation of DONG Energy into a leading, pure play renewables company,” Henrik Poulsen concluded.
Danish company said that the transaction is expected to result in a gain on sale of enterprises of approximately DKK 2.5 billion including the contingent payment related to the Fredericia stabilization plant. The gain will be presented as part of net profit from discontinued operations in DONG Energy’s financial statements after closing.
Of the $1.050 billion unconditional consideration, $250 million (DKK 1.7 billion) will be payable from 2018 to 2020. Closing of the transaction is subject to regulatory and certain other third party approvals and is expected to take place in the third quarter of 2017.
At closing of the transaction, approximately 440 employees working for DONG Energy Oil & Gas will transfer to employment with the Ineos group.
J.P. Morgan acted as exclusive financial adviser to DONG Energy in connection with the transaction.