Norway's Statoil said Monday it agreed to buy Norsk Hydro's oil and gas operations for about $29 billion, a deal that will create the world's largest offshore oil operator.
The new company will have combined production of 1.9 million barrels per day in 2007 and proven oil and gas reserves of 6.3 billion barrels of oil equivalents.
Under terms of the agreement, Hydro’s shareholders will hold 32.7 percent and Statoil’s shareholders will hold 67.3 percent of the new company. Hydro’s shareholders will receive 0.8622 share in the new company for each Hydro share and continue as owners of Hydro. Statoil shareholders will maintain their holdings in the new company on a one-for-one basis. The Norwegian State will hold approximately 62.5 percent in the merged entity.
“By combining forces, the new company will be a highly competent and financially strong Norwegian-based energy champion, well positioned to ensure continued domestic excellence and pursue international business opportunities for long-term growth,” said Jan Reinås and Jannik Lindbæk, Chairmen of the Board of Directors of Hydro and Statoil, respectively, in a joint statement. “The industry faces an increasingly challenging international landscape. To merge now makes perfect sense.”
Following the transaction, which is expected to close in the third quarter of 2007, the company will employ 31,000 people, of which about 5,000 will be from Hydro’s Oil & Energy business area, Hydro IS Partner and other personnel supporting Hydro’s current oil and gas activities. Hydro’s hydropower and solar activities will remain with Hydro, as will Oil & Energy Projects personnel working on aluminium projects.
The companies said personnel reductions in overlapping functions are expected to be limited and take place through internal replacement or natural turnover.