Dong Energy May Jettison Oil and Gas to Focus on Wind

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October 26, 2016

Photo credit: Dong Energy

ReutersBy Nikolaj Skydsgaard

COPENHAGEN, Oct 26 (Reuters) – DONG Energy may shed its oil and gas business, sharpening its focus on wind power and potentially opening the door to a deal with Danish peer A.P. Moller-Maersk, which is also seeking a new home for its energy assets.

DONG Energy has moved to the forefront of international offshore wind farm development, and that business became its biggest contributor to profits in the first half of this year.

Joining a list of firms that, hit by a two-year slump in oil prices due to oversupply, have looked at selling oil and gas assets to raise funds, DONG Energy said on Wednesday the operations were no longer of long-term strategic importance.

“(We are) reviewing strategic options regarding the future of the oil and gas business,” it said in a statement, adding it had hired JP Morgan to conduct a market assessment of the assets, which Sydbank analyst Morten Imsgard said could be worth up to 14 billion Danish crowns ($2.05 billion).

If DONG Energy decided to sell, it would directly compete with billions of dollars of oil and gas assets already up for grabs, many in the North Sea where costs are relatively high due to the basin’s maturity.

In September, Maersk, which runs the world’s biggest container shipping line, said it was seeking alliances or a separate listing for its energy operations while bulking up its transport business.

Maersk held talks last year on possibly buying buy DONG Energy’s oil and gas business but the companies failed to agree on a price, sources told Bloomberg last month.

Asked if Maersk was interested in buying the firm’s oil and gas assets, a spokeswoman said the company did not comment on speculation, adding: “We consider suitable options for growth on a case-by-case basis.”

Sydbank’s Imsgard said he would not rule it out.

“It’s an open question, what Maersk oil’s strategy is, whether it is to buy itself bigger before floating or merging with an even bigger company,” he said.

“It hasn’t become less likely, that Maersk could acquire the division.”

DONG Energy, which also said its financial outlook for 2016 was unchanged, was floated on the Danish stock market in June in Europe’s biggest listing so far in 2016, raising 17 billion crowns ($2.6 billion).

Its wind farm business generated 42 percent of its earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half of 2016, overtaking oil and gas.

Since its flotation, DONG Energy’s share price has fluctuated between 260 and 280 Danish crowns.

At 0735 GMT it was trading down 0.4 percent at 267.50 crowns while Maersk was up 0.3 percent at 10,280.

($1 = 6.8152 Danish crowns) (Additional reporting by Karolin Schaps; Writing by John Stonestreet; Editing by Alexander Smith)

(c) Copyright Thomson Reuters 2016.

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