Centrica plc (LON:CNA) is spinning off its European oil and gas business to form a joint venture with Bayerngas Norge AS amid rumours the British Gas owner could be a takeover target.
The European oil and gas exploration and production assets of Centrica will be combined with Bayerngas Norge’s on-stream producing assets and development portfolio.
Centrica will hold a 69% stake in the combined company while Bayerngas Norge's existing shareholders, led by SWM and Bayerngas GmbH, will own the rest.
The group said the deal will be a complimentary mix of producing and development assets with strong positions in the UK, Netherlands, Norway and Denmark.
The transaction is set to be completed in the fourth quarter of 2017 and is expected to create £100mln to £150mln of net present value through cost savings and “portfolio optimisation”. Production from the combined group this year is estimated at 50-55 million barrels of oil equivalent from 27 producing fields.
Centrica distances itself from exploration and production
"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,” said Centrica’s chief executive, Iain Conn.
“Alongside the recently-announced disposals of our Canada and Trinidad & Tobago assets, this joint venture creates a larger, 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."
Last month the company said it agreed to sell off its 60% stake in its Canadian exploration and production joint venture for £240mln in cash to Hong Kong-listed oil and gas producer MIE Holdings Corp.
Centrica also disposed gas assets in Trinidad and Tobago to Royal Dutch Shell plc (LON:RDSB) for US$30mln at the end of last year.
READ: Centrica shares jump on takeover rumours as weaker pound sparks interest in UK assets
Centrica shifts focus to energy supply services as takeover rumours swirl
The company has been shifting its focus towards its core services, including energy supply, as European utilities move away from legacy exploration and production businesses.
Earlier this month, Centrica became the subject of takeover speculation after Zak Mir of the Wallstreetwires website said it had attracted interest from a number of bidding parties.
The prospective bidders were said to include a consortium of Kuwait, Singapore and Canada infrastructure-focused buyers and their advisors, along with a strategic buyer with its advisors.