The new company will have a combined production of 1.9 million barrels per day in 2007 and proven oil and gas reserves of 6.3 billion barrels of oil equivalents. Hydro will continue as a global aluminium-focused company.
“By combining forces, the new company will be a highly competent and financially strong Norwegian-based energy champion,” says a joint statement from Jan Reinås and Jannik Lindbæk, chairmen of the board of directors of Hydro and Statoil respectively. “The industry faces an increasingly challenging international landscape. To merge now makes perfect sense.”
Hydro’s shareholders will hold 32.7% and Statoil’s shareholders will hold 67.3 % of the new company, while the Norwegian State will hold approximately 62.5% in the merged entity. Final closing of the deal is expected to be in the third quarter 2007. In the meantime, Hydro and Statoil will be managed as separate companies. A new name for the merged company will be selected as part of the integration process.
“This merger comes at a time when both companies were undervalued,” says Christine Tiscareno, integrated oil & gas analyst at Standard & Poor's Equity Research. “Combining a high potential discovery area (Statoil) with knowledge of data interpretation and exploration expertise in the Gulf of Mexico (Norsk Hydro) is a win-win situation.”
Standard & Poor's Equity Research believes the merger was instigated due to the severe lack of global operating resources in the sector, from materials to equipment and personnel.