OKEA agrees transformational Norway acquisition from Shell

Shell has announced the sale of its interests in the Draugen (44.56%) and Gjøa (12%) assets offshore Norway to OKEA for a consideration of US$556 million. Shell will retain 80% of the estimated US$120 million (real terms, after tax) in decommissioning liability and provide a payment of US$46 million to OKEA during the decommissioning process. Our base case valuation below the consideration paid by OKEA. This price premium is largely a result of a highly competitive market for producing assets in Norway, as numerous companies pursue ambitious growth plans and look to acquire near-term production. OKEA may also have secured a cheaper cost of capital than our flat 10% discount rate. The deal marks a watershed moment for private equity-backed OKEA, as it takes on its first operated production in Norwegian waters. For Shell, the deal continues its US$30 billion programme of rationalisation and divestiture.