You are here:

News

Proposal by Noreco to merge Noreco and Det norske oljeselskap

Norwegian Energy Company ASA (Noreco - OSE:NOR), has today proposed to Det norske oljeselskap ASA (Det norske - OSE:DETNOR) a combination of the two companies through a share-for-share merger. The proposed exchange ratio is 2.44918 Noreco shares per each Det norske share, implying a 52.5% ownership in the combined company for Det norske shareholders. Noreco's proposal gives a 9.3 % premium to the 6 months volume weighted average trading prices. Noreco believes the proposed terms to be fair and balanced, and is looking forward to discussions with Det norske.

Noreco has over the last few  months considered the possibility of  a
combination  with  the   Det  norske. Noreco acknowledges  that   new
directors and a new  board in  Det norske  were appointed  yesterday.
Based  on  industrial considerations  and  with  due  regard  to  the
companies' employees, it is however Noreco's view that it is in  both
companies' interests to as quickly as possible evaluate whether there
is basis for a potential  combination. Noreco has therefore found  it
appropriate and necessary to present the proposal now, also to  avoid
further market speculation.

Noreco firmly believes that a combination will serve the interest  of
all shareholders and employees of  both companies, and it is  Norecos
impression that there is broad shareholder support for a merger.

Compelling industrial logic
Combining Noreco and Det norske  will create the largest  independent
E&P company on  Oslo Børs. The  combined company will  have a  strong
portfolio of producing fields,  discoveries and exploration  licenses
in Norway, Denmark and the UK. The combined production from 10 fields
is approximately 18 000 barrels of  oil equivalents per day. A  total
of 25  discoveries  will  create  significant  value,  and  there  is
extensive exploration upside from drilling the best prospects in  the
combined exploration portfolio. The combined company will have a very
strong team of oil and gas professionals to create shareholder  value
from the large asset portfolio.

Strong financial logic
The combined company will be exceptionally well equipped to meet  the
challenges  in  the  financial  market,  with  high  cash  flow  from
production and a strong balance sheet. The combined company will have
a market capitalization in excess of  NOK 4 billion based on  current
market prices  and no  need  for additional  equity funding  for  the
contemplated investment program.  It will  have a size  to attract  a
broader shareholder  base,  and be  well  positioned to  exploit  new
opportunities and to play an active role in the future  consolidation
in the North  Sea region. Further,  the company will  be in a  better
position to  progress discoveries  to production  within Norway.  The
transaction creates value at today's oil prices, and the company will
have significant exposure to an upswing in the oil price.

Broad support
Noreco acknowledges, that based on the industrial and financial logic
and the proposed strategy, there seem to be broad shareholder support
for a combination of Noreco and Det norske.

Main terms proposed
Having thoroughly  reviewed  the  rationales of  a  merger  with  Det
norske, Noreco  strongly believes   that  a combination  will  create
significant shareholder  value. Noreco  is of  the opinion  that  the
proposal put forward is  fair and balanced  for shareholders of  both
companies. Det norske's shareholders are offered a premium to 3 and 6
months volume weighted average trading prices (VWAP).
Noreco's merger proposal includes the following main terms:

  * Strategy:

The strategy for  the combined company  will be to  build a  leading,
full cycle E&P  company in  the North  Sea region.  The company  will
continue  to  grow  production,   and  will  focus  exploration   and
development  activities  on  material  assets  delivering   sustained
growth.  The  asset  portfolio  will  be  actively  managed   through
acquisitions  and  divestments,  and  further  consolidation  in  the
industry will be pursued in order to create and maximize  shareholder
value.

  * Exchange Ratio:

Based on recent  trading prices, third  party valuations and  analyst
estimates, financial modelling and  assessment of underlying  assets,
Noreco proposes an exchange ratio and merger consideration of 2.44918
Noreco shares per each Det  norske share, implying a 52.5%  ownership
in the combined company for Det norske's shareholders.
The proposed  exchange  ratio  represents  a  premium  in  favour  of
shareholders in Det norske of 2.2% over 3 months VWAP and 9.3% over 6
months VWAP.  In Noreco's  opinion, the  proposed exchange  ratio  is
strongly supported by underlying values and financial modeling of the
companies which has also taken into account the difference in capital
structures. Third  party  valuations  and  analysts'  estimates  also
strongly support the  assessment of  underlying values  on which  the
exchange ratio has been based.

  * Board of Directors:

To be nominated  by the companies'  respective nomination  committees
jointly.

  * Executive Management:

Noreco to nominate the CEO and Det norske to nominate the COO.

  * Employees and Locations:

The merger would be a merger for growth, with an aim and ambition  to
keep and retain the companies' combined human capital going  forward.
The combined company will  maintain offices in Stavanger,  Trondheim,
Oslo, Harstad and Copenhagen.

  * Structure:

The combination  will be  structured  as a  legal merger  (share  for
share, with no  cash consideration)  pursuant to  the Public  Limited
Companies Act, to  be approved by  the companies' respective  general
meetings with 2/3 majority. The combination will not involve any need
for additional fundraising.
Noreco currently awaits  Det norske's response  to the proposal,  and
looks forward to discussions with Det norske's Board of Directors  in
due course. It  is Noreco's  ambition that, should  Det norske  share
Noreco's views on the rationale of  a combination, the two Boards  of
Directors can  soon reach  a mutually  acceptable merger  plan to  be
presented  to  the  respective  shareholders  of  the  companies  for
approval. Following  successful  agreement  on a  merger  plan,  both
companies will need to call  for an Extraordinary General Meeting  to
approve the merger (2/3 majority  required). The merger plan will  be
distributed to the shareholders of  both companies no later than  one
month prior to  such meetings.  A joint  information memorandum  will
also  be  prepared.   Provided  the   merger  is   approved  by   the
Extraordinary General Meetings of both  companies, the merger can  be
expected completed following  a statutory two  month creditor  notice
period. Should a mutually agreed merger  plan be in place by the  end
of February, completion of a merger (subject to shareholder approval)
could be expected within the end of Q2 2009.

Press conference
Noreco will hold a  press conference today at  11:00 CET at  Noreco's
offices in Stavanger, where the merger proposal will be presented  by
CEO Mr Scott Kerr and the  Chairman Mr. Lars Takla. The  presentation
can also be followed by web cast on Noreco's web page www.noreco.com,
both live and in an archived version.

Conference call
Noreco  will   further  host   an   analyst  conference   call   with
possibilities for questions and answers  today at 14:00 CET. To  join
the conference please call 800 888  60 for participants in Norway  or
+47 23 10 93 50 for participants outside Norway (pin code: 943705).
Pareto Securities  AS  is  acting as  financial  advisor  to  Noreco.
Advokatfirmaet Schjødt DA and Arntzen  de Besche Advokatfirma AS  are
acting as legal advisors.

Stavanger, 3 February 2009
The Board of Directors of Norwegian Energy Company ASA



Further information
For further information, please contact:
Press contact:
Lars Takla, Chairman of the Board (+47 992 83 851)
Scott Kerr, Chief Executive Officer (+47 992 83 890)
Investor contact:
Einar Gjelsvik, Vice President Investor Relations (+47 992 83 856)