Eni's oil, gas venture Var Energi plans for Oslo IPO

Italian integrated firm Eni and private equity investor HitecVision plan to launch an initial public offering (IPO) in Oslo for their Norwegian oil and gas joint-venture Var Energi.

The listing "is part of Eni's strategy of enhancing its assets in order to free up new resources to be allocated to accelerate the energy transition strategy," Eni said.

Eni, which has a 70pc share in Var Energi, said it will continue to retain a majority stake in the firm. HitecVision holds the remaining 30pc.

The IPO will likely consist of a public offering in Norway, Sweden, Finland and Denmark, and a private placement to certain institutional investors internationally, according to Eni. The Italian firm said at the end of last year it was considering an IPO for Var Energi, partly because its value was "not properly recognised".

Var Energi, one of the largest independent upstream oil and gas companies in the Norwegian offshore, had production of 247,000 b/d of oil equivalent (boe/d) in the July-August period, with gas accounting for 37pc of that. The firm is targeting output of 350,000 boe/d by the end of 2025. This compares with an estimated production of 400,000 boe/d for Aker BP, once its merger with Swedish independent Lundin Energy is complete, likely in the middle of this year. That deal will make Aker BP the second-largest producer offshore Norway after state-controlled Equinor.

"We believe oil and gas will continue to be part of the energy mix for decades to come, and the current gas market developments in Europe confirm our view that a reliable and safe supply of natural gas from Norway to Europe will be crucial," Var Energi chief executive Torger Rod said.

The IPO comes at a time of higher oil and gas prices and robust near-term cash flow prospects. Norwegian state revenues from offshore oil and gas hit a record high last year, largely driven by record-high gas prices, according to the Norwegian Petroleum Directorate (NPD).

But investors are also increasingly looking for companies to demonstrate sustainability as the transition to low-carbon energy system gathers pace. The IEA in May last year released a roadmap for achieving net zero emissions by 2050 that excludes the need for any new oil and gas field developments past those already approved.

Despite this, Norway has yet to change its attitude to upstream development. Olso awarded Var Energi 10 new production licences last week in its latest annual awards in pre-defined areas (APA) licensing round. Var Energi said the Norwegian offshore was a leader "on the way to carbon emissions reductions in the oil and gas sector, with a strong focus on electrification and carbon capture and storage." Var Energi has a target to become a net zero producer - scope 1 and 2 - by 2030.

"The [Norway offshore] will remain one of the most attractive regions for exploration and production globally due to cost competitiveness, a stable regulatory environment and low emissions," Rod said.

The firm said it will aim to pay a minimum of $700mn in dividends this year, including $200mn in the first quarter as a result of stronger commodity prices in late 2021. Var Energi made a $413mn profit in the first nine months of 2021, compared with a $1.04bn loss during the same time a year earlier.

By Caroline Varin