As Vaar Energi gears up for an initial public offering on the Oslo stock exchange, its chief executive described the move as crucial to its ambitious growth plans.

In an interview with Upstream, Torger Rod said the time is ripe for an expansion that the IPO will enable.

“Vaar Energi is the largest independent oil and gas company operating in Norway. Our production is significant and we have a large project portfolio,” he said.

“We are primed for growth.”

Vaar Energi’s average net production is 247,000 barrels of oil equivalent per day, with gas accounting for 37% of this. It is already the second-largest natural gas exporter on the Norwegian Continental Shelf (NCS), after state-controlled Equinor.

Vaar Energi, a joint venture between Eni (69.85%) and HitecVision (30.15%), has a strong organic production-growth outlook targeting net production of 350,000 boepd by the end of 2025.

Quick payback

“We have a clear growth strategy and we will continue exploring for more oil and gas,” Rod said.

The company will drill eight to 12 exploration wells per year, most of them near existing infrastructure, which allows for fast-track developments and quick payback.

“We will also drill one or two wells per year in search for potential new stand-alone developments,” he added.

While large operators such as Italy’s Eni are branching out into renewable energy, Vaar Energi will remain a pure oil and gas player in Norway.

Rod is bullish on the opportunities the country holds and believes the NCS will remain one of the world’s most attractive regions for exploration and production.

“This is due to low production costs, a stable regulatory environment, low emissions from production and still plenty of oil and gas remaining on the shelf,” he said.

Big slice, big pie

“According to the Norwegian Petroleum Directorate, there are still 50 billion barrels left to be produced in Norway, and our ambition is to take a big slice of these resources.”

Vaar Energi was formed in 2018 after the merger of Eni Norge and Point Resources, which a year earlier had acquired ExxonMobil’s operated upstream business in Norway for an estimated $1 billion.

Eni said at the time that the merger was a fundamental step in its strategy to reinforce its presence in OECD countries that have further upstream potential, such as Norway.

Rod said the public listing demonstrates that Eni and HitecVision believe Vaar Energi has room to grow.

“It is a natural next step that we are given access to the investor market and financing from the market,” he said.

Greig Aitken, director, merger and acquisition research, at Wood Mackenzie, told Upstream that the listing offers liquidity for the co-owners in the event that they want to reduce their exposure further.

It would give Vaar Energi a market valuation that might be at a premium to its implied valuation within Eni, given that Nordic-listed peers such as Aker BP and Lundin attract strong market ratings.

“As an independently listed vehicle, albeit with Eni still its largest shareholder, it will have a clear mandate, a focused investor base and an appropriate cost of capital, which leaves it well positioned to pursue appropriate growth opportunities,” Aitken said.

Part of Eni’s broader strategy is to create dedicated self-financing entities to ensure the most efficient capital allocation at a group level, he added.

Eni chief financial officer Francesco Gattei said the IPO provides “a solid foundation for long-term value creation and shareholder returns”, adding that the major will continue to support Vaar Energi as a majority shareholder.

HitecVision’s plan for its shares in Vaar Energi is not known. The private equity player usually sells companies after about five years if it has increased the value of the asset.

Senior partner Lars Christian Bacher declined to comment.

The IPO is expected to consist of a private placement and public offering to investors in Norway, Sweden, Finland and Denmark, and a private placement to institutional investors outside Norway and the USA.

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