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Austria's OMV creates JV SEB Upstream with Malaysia's Sapura

Highlights

Deal underpins 500,000 boe/d output target

50:50 venture questioned by some analysts

Malaysia gas discoveries to boost output

London — Austria's OMV and Malaysian group Sapura Energy signed a deal Friday to create an upstream joint venture, SEB Upstream, or SUP, intended to tap into opportunities in Malaysia and the Asia-Pacific, as well as offshore Mexico, they said.

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In a statement, OMV said it and Sapura would each hold 50% stakes in SEB, with OMV paying $540 million for its stake, plus $85 million related to resources volumes in Mexican offshore Block 30. The two also agreed a refinancing of inter-company debt totaling $350 million.

The deal is part of an expansion into Asia-Pacific by OMV, which has the Austrian state as its largest shareholder and is a quarter-owned by Abu Dhabi sovereign wealth fund Mubadala.

Some investors have questioned whether a 50:50 joint venture will result in wrangling between the two parent companies.

OMV said Sapura Energy's expected production from existing assets was 260 million barrels of oil equivalent -- it had "entitlement" production last year of 11,000 boe/d-- and it had "strong growth prospects."

In 2020 the venture will bring on stream the SK408 gas discoveries, raising its total production to a plateau of 60,000 boe/d, OMV said, highlighting also exploration blocks in Australia, Mexico and New Zealand.

Sapura is involved in supplying gas to the Malaysia LNG plant at Bintulu.

"Oil and gas demand is expected to increase by 20% until 2030 in Malaysia and OMV is taking the opportunity to capitalize on this growing market," OMV CEO Rainer Seele said. The deal "will support our upstream strategy towards establishing Australasia as a new core region," he added.

DIVERSIFICATION DRIVE

Since taking up his post in 2015, Seele has reorientated OMV toward Russia while scaling back its North Sea presence. The company was already trying to diversify, partly to reduce its reliance on North Africa and particularly Libya, where its stake in the Sharara field has been a source of disruption.

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In March, OMV bought Shell's upstream business in New Zealand for $578 million.

This week it also said it was selling its stake in a number of Tunisian oil assets to Africa-focused Panoro Energy.

Last week OMV said it hoped to reach a 2020 output target of 500,000 boe/d as soon as the end of this year on the back of the Sapura deal, the New Zealand deal with Shell, and a purchase of fields offshore Abu Dhabi earlier this year. It reported third quarter production of 406,000 boe/d, up 19% on the year.

--Nick Coleman, nick.coleman@spglobal.com

--Edited by Maurice Geller, newsdesk@spglobal.com