DONG says oil & gas segment is “not considered a long-term strategic commitment” – DONG engages J.P. Morgan to conduct a market assessment

Denmark-based wind energy developer DONG Energy (ticker: DENERG) successfully launched Europe’s biggest 2016 IPO in June. Besides its robust offshore wind development business in Europe, bioenergy, thermal power and energy distribution segments, the company runs a healthy oil and gas business.


DONG Energy: Selling its Oil & Gas Segment, or Not?

DONG Energy’s Oil & Gas Asset Locations

This week, DONG, the world’s largest developer and operator of offshore wind farms, put out a press release in order to reconfirm “its intention to build a world-class clean energy company with a portfolio based in offshore wind, bioenergy and green distribution and customer solutions.”

But what about the company’s oil and gas segment?

DONG said that it would manage its oil and gas business for cash, and that future cash flows from the oil and gas business would be used to fund investments in renewable energy. DONG confirmed that the oil & gas business was not considered a long-term strategic commitment.

DONG Energy: Selling its Oil & Gas Segment, or Not?

Source: 1H 2016 DONG Energy presentation

The company said in its news release, “In response to media speculation, DONG Energy confirms that it is reviewing strategic options regarding the future of the oil and gas business,” saying that J.P. Morgan has been engaged to conduct a preliminary market assessment.

In May DONG announced it had secured an agreement to sell its 100% ownership share in its DONG Gas Distribution A/S and related operational activities to state-owned However, the company emphasized in the press release this week that it has not made a decision to divest the oil and gas business.

DONG Energy: Selling its Oil & Gas Segment, or Not?

Currency Conversion: 7.4 billion Danish Krone = US$1.09 billion

DONG reported consolidated revenue of DKK 71 billion (EUR 9.5 billion) in 2015.

The company said its daily production of oil and gas in 2015 averaged 115,000 BOEPD, of which 90 % came from Norwegian fields and 10% from Danish fields, which it said is “equivalent to the annual oil and gas consumption of ten million Europeans.” The majority of DONG Energy’s production comes by far from the offshore Norwegian gas field Ormen Lange.

DONG Energy: Selling its Oil & Gas Segment, or Not?

Norway’s Ormen Lange field – Deepwater asset is the source of DONG Energy’s largest production.

DONG’s E&P operations

At the end of 2015 DONG’s oil and gas operations included these licenses:

14 in Denmark
19 in the UK (West of Shetland)
23 in Norway
2 in the Faroe Islands

1 near Greenland

Producing oil fields:

Cecilie (Danish)
Lulita (Danish)
Nini (Danish)
Siri (Danish)
Ula (Norwegian)
Gyda (Norwegian)
Tambar (Norwegian)

Producing gas fields:

Marulk (Norwegian)
Trym (Norwegian)
Alve (Norwegian)
Ormen Lange (Norwegian)
Laggan-Tomore (UK)

Producing oil and gas field:

Syd Arne (Danish)

DONG Energy: Selling its Oil & Gas Segment, or Not?

Photo: DONG Energy

Activity at DONG E&P Locations:

  • Barents Sea: exploration license
  • The Norwegian Sea: DONG is a partner in 11 producing oil and gas fields on the Norwegian Continental Shelf with the majority of production from the Ormen Lange gas field, in which DONG Energy owns a 14% share. The development of the Ormen Lange field has continued with installation of another subsea production unit, and now, there are 17 wells in production in the field. DONG is operator of the Trym and Oselvar fields, and initiated development of these fields in 2009. The Trym gas field was put in production at the beginning of 2011. The natural gas is transported from the subsea facilities to the treatment facility in Nybro, Denmark, via the Danish Harald and Tyra platforms, while the light oil condensate is transported to the terminal in Fredericia via the oil pipe. The Oselvar oil and gas field field was put in production in April 2012. Most of the gas production from the field is transported to the Ula field for injection, for the purpose of enhancing oil production from Ula.
  • West of Shetland: DONG holds 20 licenses offshore, operator of 7 – discoveries at Rosebank, Laggan, Tormore, Cambo, Edradour and Glenlivet. In 2010, DONG with the operator Total, decided to develop the Laggan-Tormore fields. Production from the fields started early 2016.
    The development of these fields also comprised installation of a transport system for the gas to Scotland via the Shetland Islands, which provides an opportunity for existing and future discoveries in the area. Together with Total, the operator, DONG decided to develop the gas fields Glenlivet and Edradour. The fields will be developed simultaneous and will be connected to the Laggan-Tormore infrastructure.
  • The North Sea: DONG holds 27 licenses, operator of 20 including the producing Siri field, Cecilie, Nini and Stine

The wind business

DONG announced a milestone this week by tallying the installation of 1,000 offshore wind turbines. The company said that from 2016 to 2020, it expects to build more offshore wind capacity than it built altogether in the preceding 25 years.

“By 2020, we aim to have doubled our installed capacity compared with 2016 from 3.0 GW to 6.5 GW. The installed capacity in 2020 is equivalent to the annual electricity consumption of 16 million Europeans,” the company said.

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