Poland's PGNiG Upstream International (PUI), a wholly owned subsidiary of PGNiG SA, purchased from Total E&P Norge AS shares three producing fields (Morvin, Vilje, Vale) as well as one field in the development phase (Gina Krog) on the Norwegian Continental Shelf.
Mariusz Zawisza, PGNiG SA chief excutive stated:
Engagement in four new fields in Norway is particularly important for us. Firstly, it means immediate production increase outside Poland by approximately 60 per cent. Secondly, acquisition enables us to maintain increased production rates throughout the next ten years. Finally, we expect short payback period from this investment. This is good news for our shareholders.
Estimated 2014 production from the fields corresponding to PUI's interests is approximately 320 thousand toe (tonnes of oil equivalent) and 90 million m3 of gas (which is approximately 8 thousand boe/d). According to the operator's data the average remaining production from the fields will last for 14 years.
According to an independent reserves auditor, recoverable oil (72%) and gas (28%) reserves attributable to PUI's interests amount to 33 million boe (barrels of oil equivalent). It means increase of PGNiG's reserves in Norway by approximately 60%.
The purchase price is NOK1,950 million (US$293.7 million), with an effective date of January 1st 2014. It is expected that approximately 45% of the acquisition price will be settled using cash flows acquired by PUI and generated in the period between the agreed effective date and the actual completion date. The remaining part will be covered from the bridge financing provided by PGNiG and from the reserve based loan.
It is particularly important as the new licenses still hold further exploration potential. Company is interested in entering the Utsira High basin with the Gina Krog field, which is considered to be one of the most prospective areas on the Norwegian Continental Shelf for exploration with significant yet to find reserves. Future investments on the acquired licenses will be funded from the operating cash flow of PGNiG's Norwegian operations.
The agreement to purchase shares in Morvin, Vilje, Vale and Gina Krog is subject to a number of conditions precedent, including the securing of required Norwegian administrative decisions. The conditions precedent shall be fulfilled before the end of 2014.