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Norsk Hydro offers $2.56B for Spinnaker Norwegian company pledges ‘significant amount of wells’ for U.S. Gulf; Spinnaker has portfolio of discoveries, prospects Ray Tyson Petroleum News Contributing Writer
Norwegian company Norsk Hydro ASA, agreeing to shell out a cool $2.56 billion in cash to buy Texas-based Spinnaker Exploration, clearly would be positioned to become a major player in the U.S. Gulf of Mexico when the deal closes.
Spinnaker is a relatively small but aggressive and highly successful offshore explorer, having compiled a killer portfolio of Gulf discoveries that aside from its equally impressive prospect inventory is poised to nearly double daily production over the next few years, from 23,000 barrels of oil equivalent to more than 50,000 barrels.
Hydro already participates in the Telemark and Lorien discoveries in the Gulf. “Combined with Spinnaker Exploration’s assets, Hydro will be a significant player in developing the Gulf of Mexico in the years to come,” Hydro asserted. Portfolio includes 25% of Thunder Hawk Spinnaker’s deepwater portfolio includes a 25 percent stake in the Thunder Hawk discovery, located within spitting distance of the BP-operated Thunder Horse field, the largest oil discovery in the Gulf.
“It’s a company with not only a significant portfolio but also an excellent track record when it comes to exploration and production growth,” Hydro chief executive Elvind Reiten said in a Sept. 19 conference call.
Along with Spinnaker’s production and estimated 129 million barrels of oil equivalent reserves, Hydro would inherit about 350 offshore exploration tracks that coupled with its own would rank Hydro among the 10 largest leaseholders in the Gulf, with more than 400 leases.
The company said it has big plans for the Gulf that include “a significant amount of the wells” and more active participation in future oil and gas lease sales.
“It is a significant step forward in our international oil and gas growth and particularly so for the Gulf of Mexico,” Reiten said of Spinnaker. “And we are talking about a company that operates a significant part of their production and future exploration.”
The $2.56 billion deal, which includes $110 million of Spinnaker debt, is expected to close during this year’s fourth quarter but will require the approval of both Spinnaker’s shareholders and government regulators. Hydro averages 575,000 boe per day Hydro, a large energy and aluminum producer with a market value of around $29 billion, currently averages about 575,000 barrels of oil equivalent production per day, ranking it among the largest offshore companies in the world. In addition to the Norwegian continental shelf, the company’s operational base, Hydro produces oil and gas in Angola, Canada, Russia and Libya, and also is active in Iran and Denmark, as well as the U.S. Gulf. The company has about 35,000 employees in 40 countries.
Hydro agreed to pay $65.50 per share for Spinnaker, a pricey sum that carried a hefty 34 percent premium when compared to the $48.75 value of a Spinnaker share just prior to the announcement. In addition to the premium to Spinnaker, Wall Street overwhelmingly endorsed the deal. Spinnaker stock jumped $15.40 per share, up nearly 32 percent from the previous close, to $64.15 per share at market close on the day the buyout was unveiled.
Spinnaker, already a successful deep-gas operator on the Gulf’s continental shelf, established a rich portfolio of deepwater prospects and discoveries that in addition to Thunder Hawk include varying interests in Eastern Gulf fields Spiderman, San Jacinto and Q. These fields, along with others in this remote region of the Gulf, are to be served by Independence Hub, an “ultra-deepwater” central gas-processing facility scheduled to come on-line in 2007. Spinnaker also holds a 25 percent interest in the deepwater Front Runner oil field.
In total, Spinnaker has drilled 176 wells in the Gulf region with a 60 percent success rate. Hydro said it also likes Spinnaker because of the company’s extensive seismic database covering most of the Gulf. As part of the deal, Hydro also would inherit Spinnaker’s assets in Nigeria.
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