Rumours about Equinor being interested in Lundin, Neptune looking for bids and Vår Energi considering a stock market float, there have been plenty of speculations around corporate restructuration plans recently.
So, is it a surprise to now hear that Aker BP and Lundin are merging?
The timing is good with respect to commodity prices. Listed companies are looking to use their buoyant stock market value as a currency to do deals.
It should also be noted that traditional tools of a market float or a sale to a competitor such as an NOC have become increasingly challenging. This is because of a drop in appetite from public market investors to invest in fossil fuels and NOC’s not having been particularly active on the acquisition front.
Exploration
What is the effect of the merger in terms of exploration activity? Both Aker BP and Lundin have been amongst the most active drillers this year.
Aker BP drilling the Liåtarnet discovery is an example of trying to make unconventional accumulations work. Targeting the Stangnestind prospect in the Barents Sea is another example of a courageous well, even when there is still an unanswered question as to how the small pre-drill prospect volumes could justify the well in the first place.
Aker is an active player in the sand injectite play of the Alvheim area, where Lundin also has a stake in. With the merger it means that some licences such as the one covering Volund (PL150) will become 100% owned.
Lundin has also been active on the exploration front this year, albeit with limited success. Wells such as Dovregubben, Bask and Polmak all had sizeable pre-drill volumes but equally high-risk profiles.
Overseeing this, even though both companies have drilled a reasonable number exploration wells, a picture seems to emerge of a company (Aker BP) that has mainly been chasing relatively small volumes (Mugnetind, Stangnestind, Lyderhorn) versus a company that is willing to drill larger prospects with the associated risks (Lundin).
Will this appetite for exploration continue once the merger has been formalised? Lundin already admitted that the exploration budget for 2022 will be more limited than this year, there may already be a hint there. However, with Aker BP’s management team running the company, how will the two exploration cultures mix and how will the attitude to taking risk change? Time will tell.
HENK KOMBRINK
