Lundin Petroleum proposes spin-off of its non-Norwegian producing assets into an independent oil and gas company
Lundin Petroleum AB («Lundin Petroleum» or the «Company») is pleased to announce that its Board of Directors has proposed to spin-off its assets in Malaysia, France and the Netherlands (the «IPC Assets») into a newly formed company called International Petroleum Corporation («IPC») and to distribute the IPC shares, on a pro-rata basis, to Lundin Petroleum shareholders (the «Distribution»).
Subsequent to an internal reorganisation of Lundin Petroleum whereby the various subsidiaries holding the IPC Assets will be acquired by IPC, and subject to satisfactory receipt of all necessary approvals and consents, including the approval of Lundin Petroleum’s shareholders, all of the shares of IPC will be distributed to existing Lundin Petroleum shareholders on the basis of one IPC share for every three shares held in Lundin Petroleum. IPC has applied to the Toronto Stock Exchange («TSX») to list its shares following the Distribution on such exchange under the ticker IPCO, and also intends to list its shares on the NASDAQ Stockholm stock exchange.
Background and reasons for the Distribution and listing
The Board of Directors and management of the Company routinely review and assess strategic alternatives available to the Company to enhance shareholder value. As part of that review, the Board of Directors and management concluded that given ongoing developments and successes with the Company’s assets in Norway, the IPC Assets, held within a separate and independent entity, would benefit from enhanced strategic flexibility and management focus, as well as be ascribed increased focus, visibility, and value from investors.
With a renewed strategy and focus, management believes that IPC can be built into a leading international independent oil and gas company, focused on the production and development of high quality assets around the world. Management believes an independent IPC will be well positioned to pursue both organic and inorganic growth opportunities over time. The significant cash flows generated from IPC’s long-lived assets will provide financial capacity to pursue this strategy.
The proposed spin-off of the IPC Assets will allow Lundin Petroleum’s management to solely focus on maximising shareholder value from its Norwegian portfolio which has continuously grown in size and value since Lundin Petroleum entered Norway in 2004, with the Norwegian assets now accounting for 96 percent of Lundin Petroleum’s reserves and 88 percent of Lundin Petroleum’s 2017 production guidance. Lundin Petroleum’s strong liquidity position of USD 1 billion of headroom coupled with its operating cashflow generation allows the Company to retain all external bank debt and still be able to fully fund its committed capital expenditure up to Johan Sverdrup first oil in late 2019. The Company’s net debt at year end 2016 amounted to approximately USD 4 billion.
«The spin-off of our international assets into IPC creates an exciting new company with a strong balance sheet and a proven Board and management team. Their focus will be to create value at a time in the cycle when the industry remains under-capitalised and multiple opportunities are available as companies rationalise their portfolios. With the spin-off, Lundin Petroleum will become fully focused on Norway, which I am convinced will serve to further crystallise the value of our high-growth asset portfolio in the North Sea and the southern Barents Sea.»