On Thursday, Equinor ASA (NYSE:EQNR) and Shell PLC (NYSE:SHEL) subsidiaries Equinor UK Ltd and Shell UK Ltd announced the plan to merge their U.K. offshore oil and gas assets to form the U.K. North Sea's largest independent producer.
This joint venture, based in Aberdeen, aims to enhance domestic oil and gas production and strengthen the U.K.'s energy security. The new joint venture will combine decades of U.K. North Sea expertise to address the basin's natural production decline.
By uniting portfolios, the company aims to enhance economic recovery, operating with greater agility, cost-efficiency, and strategic focus to maximize the value of U.K. Continental Shelf resources.
The new joint venture will focus on extending the life of key North Sea oil and gas fields and platforms. It will include Equinor's assets in Mariner, Rosebank, and Buzzard, alongside Shell's interests in Shearwater, Penguins, Gannet, and others, as well as exploration licenses.
Both companies aim to continue contributing to the North Sea's development as collaborative partners, strengthening their roles in the U.K. energy sector.
After completion, the new company will be self-funded, with Equinor's stake accounted for under the equity method. Equinor will not report any organic capital expenditures related to this investment.
This deal allows Equinor to benefit from higher short-term production and cash flow while also reducing overall risk exposure through a more balanced ownership structure.
The transaction will have an economic effect starting January 1, 2025, the company said in the press release. Completion is subject to approval and is expected by the end of 2025.
Equinor's Executive Vice President for Exploration and Production International, Philippe Mathieu, said, "This transaction strengthens Equinor's near-term cash flow, and by combining Equinor's and Shell's long-standing expertise and competitive assets, this new entity will play a crucial role in securing the UK's energy supply."
Shell's Integrated Gas and Upstream Director, Zoë Yujnovich, added, "Domestically produced oil and gas is expected to have a significant role to play in the future of the U.K.'s energy system. To achieve this in an already mature basin, we are combining forces with Equinor, a partner of many years."
"The new venture will help play a critical role in a balanced energy transition providing the heat for millions of UK homes, the power for industry and the secure supply of fuels people rely on."
Notably, Equinor currently produces about 38,000 barrels of oil equivalent per day in the U.K., while Shell UK produces over 100,000 barrels per day. The new company is expected to produce over 140,000 barrels per day in 2025.
Price Action: EQNR shares are up 0.15% at $24.03 and SHEL was down 0.27% at $64.04 at the last check on Thursday.
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