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Norway mulls $50B oil IPO
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August 4, 1999: 5:30 a.m. ET
Government eyes merger and privatization of giant state oil groups
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LONDON (CNNfn) - Norway confirmed Wednesday it is mulling a merger of the country's state-owned oil interests that could create a giant company worth around $50 billion.
"We are looking at all the options," a spokeswoman at Norway's oil ministry told CNNfn.com, "these include privatization, partial privatization and leaving things as they are." The ministry has selected Warburg Dillon Read and Norway's Pareto Fonds as investment advisers to a possible deal.
A drop in oil prices last year triggered sweeping changes in the oil and gas industry, including huge deals such as BP-Amoco, BP Amoco-ARCO, Exxon-Mobil and Total-Fina.
"The whole industry is changing," said Sissel Edvardsen of the Norway's Ministry of Petroleum and Energy, "It's time for us to look at this - the current situation has been in place for 15 years."
The Norwegian parliament is due to rule next spring on changes to the state-owned assets.
Analysts gave the prospect of a privatization a relatively cool welcome.
"These are attractive assets, and an interest in upstream assets is always valuable," said Peter Hitchens of London broker Williams de Broe. However, he added that the spate of recent mergers has been driven by cost cutting in the downstream (retail and marketing) sector, and merging Norway's two principal oil companies would not offer much scope for lowering costs.
"Norway is a relatively high-cost area [for oil exploration], the Norwegian Shelf is becoming more mature and it's slipping down the appeal curve," added Hitchens.
Norway's state-owned oil and gas assets are controlled by two companies, Statoil and a separate entity called State's Direct Financial Interest (SDFI). SDFI was set up to give the country a direct interest in oil exploration discoveries.
The Financial Times reported that the combined reserves of the two groups would be about 17 billion barrels of oil equivalent. That would place the group just below the top rung of international players such as BP Amoco, Royal Dutch Shell and Exxon Mobil (XON), which have reserves of some 20 billion barrels.
On this basis the new company could enjoy a market capitalization of up to $50 billion, the newspaper reported.
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