Joint venture creates top five independent oil firm

Centrica is combining its oil and gas business with Bayerngas Norge.

The joint venture will comprise Centrica’s assets in the UK, Netherlands and Norway and Bayerngas Norge’s assets in the UK, Norway and Denmark.

Centrica said the deal will create a joint venture which is among the top five independent operators in Europe in terms of production and reserves.

Centrica will contribute its European E&P business and make a series of deferred payments totalling £340 million through 2022 for its 69% stake.

Bayerngas Norge will contribute 100% of its shares for its 31%.

The joint venture will be incorporated and tax resident in the UK and led by Centrica E&P’s MD Chris Cox.

The transaction is expected to complete later this year. Centrica said the combination should lead to further consolidation and joint ventures, including the possibility of an IPO in the medium term.

The tie-up is expected to create synergies of £100m to £150m through cost savings and portfolio optimisation.

Centrica E&P and Bayerngas Norge staff employed by “entities that are contributed to the joint venture” are “expected” to transfer to the new business.

Centrica said the new venture would create cost saving opportunities through “the streamlining of operations and areas of overlap, for example at Cygnus.”

Near term, the joint venture will invest in the range of £400m to £600m per year.

Centrica CEO Iain Conn said: “As part of our strategy of 2015, we have been aiming to develop a more focused and stronger E&P business which will contribute to the resilience of the group while limiting Centrica’s E&P participation.”