Centrica is to combine its exploration and production (E&P) business with an Oslo-based company.
It is joining forces with Bayerngas Norge for the new venture, with Centrica owning 69% and the remaining 31% by Norwegian firm’s shareholders, led by Stadtwerke München (SWM), a Munich-based company whose investments include energy and transport.
The joint venture will create a European E&P business by combining Centrica’s production profile with the Norwegian firm’s on-producing assets and development portfolio.
It will own exploration and development assets in the UK, Netherlands, Norway and Denmark, two-thirds of which will be gas.
This year’s combined production is estimated at 50-55 million barrels of oil equivalent from 27 producing fields.
The new company will have its own board and will operate as a separate company but will remain Centrica’s balance sheet.
It is expected to lead to up to £150 million of cost savings.
Iain Conn, Group Chief Executive of Centrica 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.
“Alongside the recently-announced disposals of our Canada and Trinidad & Tobago assets, this joint venture creates a large, more sustainable and more capable European E&P business and brings together like-minded shareholders who have a shared strategic vision on the role of E&P.”
The transaction is expected to close in the fourth quarter of 2017, subject to regulatory approvals and other conditions.