COPENHAGEN: Danish energy group DONG Energy plans to quit the oil and gas business to focus solely on offshore wind power, just five months after giving the impression it would maintain its presence in oil and gas when it listed in Copenhagen.
The company, the world’s biggest operator of offshore wind power, had considered selling its oil and gas business in the past, but announced in January, prior its June 9 initial public offering (IPO), that it would not.
Last month it said it was reconsidering a possible sale. Its IPO prospectus had said its oil and gas business would focus on “a portfolio of low-cost, low-risk, long-term assets” but the company said by emphasising renewables, it had made clear that it did not see oil and gas as a long term strategic commitment.
Chief Executive Henrik Poulsen said on Tuesday DONG had spent the last 12-15 months restructuring its oil and gas business to “focus on high quality, low cost assets” and “a combination of a number of different factors” had made it decide to sell.
“We are still in a very early stage of exploring market interest, but it is our impression that there is interest in an asset of this kind,” he said on a conference call, adding the company had not set a deadline for selling the business.
DONG said cash flow at its oil and gas business breaks even at $35 per barrel. Brent oil has recovered to around $46 a barrel since reaching multi-year lows below $30 a barrel in January.
“Today we probably have one of the lowest break even businesses in the entire North Sea area,” Poulsen said. A more than two-year-old oil price slump means many oil and gas assets are already up for sale in the North Sea, where costs are relatively high due to the basin’s maturity.
Analysts at Bernstein said the divestment was driven by a recent rise in the oil price and DONG Energy’s better cost position in its oil and gas business, but said they were “surprised with shift in strategy so soon after the IPO”.
DONG’s shares were trading 1 percent higher at 256.5 crowns each by 1433 GMT, below its IPO price of 258 crowns.
