Statoil/SDFI merger proposed
Strengthening Statoil with part of or all the government's directly-held petroleum assets (SDFI) and then partially privatising and listing Norway's state oil company has been recommended by its board of directors.
"The government now has a unique opportunity to enhance the value of its overall oil and gas assets, while laying a solid basis for a strong national oil and gas company which will be a world leader," says Statoil chairman Ole Lund.
At the request of the Ministry of Petroleum and Energy, the board has drawn up a report on future development of Statoil and the SDFI - the state's direct financial interest in Norwegian petroleum operations.
This document aims to identify solutions which maximise the state's overall asset value, and which can help to reduce its risk.
Its recommendations can be summarised as follows:
- The value of the state's overall oil and gas asssets should be strengthened by merging all or a substantial part of the SDFI with Statoil to create a single commercial entity. This increase in value will find expression in the stock market after the enlarged group has been listed. A combined SDFI and Statoil meets the requirements for creating a strong Norwegian-based oil and gas company in international markets.
- Statoil's ownership structure should be changed to provide the group with private shareholders and a stock exchange listing.
- A new management ("caretaker") arrangement should be established for that part of the SDFI's resources which might not be reallocated to a commercial company. The board believes that the government should consider refraining from taking interests in new licences.
Commercialising the SDFI by transferring all or part of its portfolio to Statoil, combined with a partial privatisation of the group, would allow the state to realise substantial additional value by offering shares to private investors.
Calculations by Statoil and by Norwegian and international financial advisers show that a Statoil/SDFI would achieve a substantial value increase as a listed company.
Combining the two would provide a size and financial strength which provides opportunities to extend Statoil's leading role in Norway's offshore sector and its positions in international exploration and production as well as in the European gas market.
A commercialisation of the SDFI would thereby provide opportunities for increased value creation because its capital assets would be placed in the context of a commercial company.
This would boost the value of the state's oil and gas assets, secure and develop existing market positions and eliminate conflicts of roles between the government and the players.
"The board has concluded that the combination of transferring the SDFI to a company and partially privatising a strengthened Statoil would give the best financial gain for the state," says Mr Lund.
"Our recommendations identify an opportunity to increase the value of the state's oil and gas assets which also allows part of this wealth to be reallocated. In this way, they will also help to limit the state's exposure to changes in the oil and gas industry."
The board believes that both Statoil and its owner would benefit from a change in the ownership structure to give the group private shareholders and a stock exchange listing.
As a listed company, Statoil would gain the necessary continuous evaluation and supervision from the capital market. A new ownership structure would also normalise the group in relation to its competitors.
At the same time, the division of roles and responsibilities in Norwegian petroleum policy would become clearer since the government would no longer be Statoil's sole owners.
However, the state should retain a shareholding which makes it possible to maintain the group as a competitive Norwegian-based players in international energy markets.
Statoil's directors note in their report that extensive changes have taken place in the market, which affect Norway as an oil nation and the state as a player in the petroleum sector. These have led to greater competition and higher risk.
The oil market is characterised by increased globalisation and more uncertainty. A prominent feature of today's oil market are the acquisitions and mergers which have made some of the international oil companies even bigger. Clear relationships can be seen between size and development in market value for oil and gas companies.
Deregulation in the European gas market has created a new position, which poses major new challenges for Norway as a gas nation and for the companies as players in a European market.
Further development of the market positions achieved for Norwegian gas operations will be crucial in securing the value of the Statoil and SDFI gas portfolios.
In developing Norwegian petroleum policy, the authorities have shown an ability to adapt instruments to changing conditions and competitive terms.
Today's policy instruments and structures were developed in the 1970s and 1980s, and have functioned as intended. But the board points in its report to the fundamental changes now being experienced by the oil and gas industry, both internationally and on the Norwegian continental shelf.
Oil and gas resources represent a major component in Norway's national wealth, and the state's share of these assets comprise several elements - anticipated tax revenues, the value of direct ownership through the SDFI and the value of companies owned wholly or partly by the state.
Managing these assets in the best possible way calls for policy instruments to be modified in order to maximise their overall value.
The state's position on the Norwegian continental shelf gives it substantial assets and great freedom of action, and the board notes that the government has several options for organising its participation in petroleum operations.
The board concludes that strengthening Statoil with all or a substantial part of the SDFI is the solution which gives the state's oil and gas assets their highest value.
Further information from:
- John Ove Lindøe, senior vice president public affairs, tel: +47 51 99 68 81 (office), +47 90 57 20 89 (mobile)
- Wenche Skorge, vice president public affairs, tel: +47 51 99 79 17 (office), +47 91 87 07 41 (mobile)