DNO ASA Acquires Sval Energi Group AS for $450 Million
DNO ASA, the Norwegian oil and gas exploration and production company, has announced its decision to purchase 100% of the shares of Sval Energi Group AS from HitecVision for a cash sum of USD 450 million, which is based on a total enterprise valuation of $1.6 billion. This strategic acquisition will enhance DNO’s existing North Sea operations, providing increased scale and diversification to reinforce its status as a prominent independent oil and gas enterprise in Europe. The acquisition will be funded through the company’s existing liquidity, which includes available credit lines, along with the establishment of an optimal capital structure prior to finalizing the deal.
Significant Production and Reserves Growth Expected
The acquisition is projected to elevate DNO’s global net production by approximately two-thirds, reaching around 140,000 barrels of oil equivalent per day (boepd) on a pro forma basis for 2024. Additionally, the proven and probable (2P) reserves are expected to increase by 50% to 423 million barrels of oil equivalent (boe). Post-acquisition, the North Sea 2P reserves will rise from 48 million boe to 189 million boe, while the 2C resources will expand from 144 million boe to 246 million boe. Furthermore, this transaction is anticipated to quadruple DNO’s production in the North Sea to about 80,000 boepd, effectively positioning the company among the top players operating in the Norwegian Continental Shelf.
Transforming North Sea Operations and Streamlining Costs
With this acquisition, the North Sea is set to become the largest contributor to DNO’s overall net production, accounting for approximately 60% of the total output, while the remaining production will primarily stem from two operated fields located in the Kurdistan region of Iraq. The deal will also generate tax synergies, reduce general and administrative expenses, and lower DNO’s borrowing costs. DNO will fortify its presence in key areas of the Norwegian Continental Shelf, where it has achieved significant exploration success since 2020, resulting in 14 discoveries that have collectively contributed around 100 million boe of contingent resources (2C) net to the company.
Leveraging Sval Energi’s Diverse Portfolio
Sval Energi brings a robust portfolio that includes non-operated stakes in 16 producing fields offshore Norway, anticipated to yield a net production of 64,100 boepd in 2024. The company boasts 141 million boe in net 2P reserves and 102 million boe in net 2C resources, with its largest assets measured by net 2P reserves being Nova, Martin Linge, Kvitebjørn, Eldfisk, Maria, Symra, and Ekofisk. The portfolio is known for being highly cash generative, with operational cash flow reaching USD 565 million in 2024 and production costs remaining low at USD 14 per boe. It maintains a balanced focus between liquids and gas, while also presenting additional growth opportunities through the development of current assets, ongoing projects, and potential redevelopment initiatives.
Integration Plans and Financial Strategy
Prior to the deal’s completion, the MLK wind farm will be excluded from the transaction. A team of 93 employees will be incorporated into the DNO organization as part of the acquisition process. The financing for this deal will be sourced from DNO’s existing cash reserves and various debt financing options available to the company. By the end of 2024, DNO is expected to hold $900 million in cash along with an additional $100 million in liquidity from its reserve-based lending (RBL) facility. Other potential funding avenues include new bond issues and RBL debt, as well as offtake-based financing arrangements. Pareto Securities is serving as the financial advisor for DNO, while Advokatfirmaet Thommessen is providing legal counsel.
Key Statements from DNO Leadership
Bijan Mossavar-Rahmani, DNO’s Executive Chairman, commented on the acquisition stating, “This is a rare opportunity to acquire a portfolio of high-quality oil and gas assets on the Norwegian Continental Shelf, and we have moved fast to capture it.” He emphasized that the Sval Energi portfolio, characterized by low unit production costs and minimal immediate investment needs, is expected to generate substantial cash flow and will support the ongoing development of DNO’s recent discoveries in Norway.
