Aker Solutions will split into two companies to speed up a streamlining process that will reduce costs and better position all parts of the group to meet the needs of customers in an increasingly competitive global energy industry.
The Subsea, Umbilicals, Engineering and Maintenance, Modifications and Operations (MMO) areas will form a new company under the Aker Solutions name. The company will be more strategically aligned, have a narrower focus and deeper synergies to strengthen its leading position through its unique subsea technology and state-of-the-art offshore field design.
The other units, including Drilling Technologies, Aker Oilfield Services and Process Systems, will be developed independently as part of a new oil-services investment company, named Akastor. These business areas, which have significant operational, technological and commercial differences, will have greater strategic freedom to develop individually through both organic growth and transactions.
The split, which will take place as a spin-off of the new Aker Solutions, is scheduled to occur around the end of September. Both companies will be listed on the Oslo stock exchange.
"The new Aker Solutions will be a leaner and more focused company that will be able to offer customers the unique and cost-effective technology and design they need to succeed," Executive Chairman Øyvind Eriksen said. "The company will, through a commitment to operational excellence and organic growth, be better placed to build on its leading position in the fastest growing areas of the global energy markets." Shareholders will get one new Aker Solutions share for each stock held in the existing company at the time of the separation. They will also keep their shares in the remaining business, which will be renamed Akastor at the time of the split, ensuring that the existing shareholder structure is implemented in each company.
The transaction has met with approval from Aker Solutions' largest shareholders, Aker Kværner Holding and Aker ASA. An extraordinary general meeting will be held in August to vote on the separation. "We are taking a major step in a transformation that began 12 years ago with the merger of Kværner and Aker Maritime," said Eriksen. "After this transaction and the 2011 Kværner spin-off, we will have created three distinct companies to service the global energy industry, providing offshore construction, unique subsea technology and field design and oilfield services. We have also divested NOK 12 billion in assets as part of the process."
New Management Luis Araujo, the regional president for Aker Solutions in Brazil, will be chief executive officer of the new Aker Solutions. Frank Ove Reite, currently managing partner at Converto, will become CEO of Akastor. Øyvind Eriksen will remain chairman of the board of Aker Solutions.
"While I will continue to play an active role as chairman, it is time for new leadership to take these companies forward," Eriksen said. "Luis has proved more than capable in managing our expansion in Brazil and will provide inspired leadership as the new Aker Solutions builds on its success in the subsea and deepwater markets. Frank has a long experience within the Aker group and is excellent at developing businesses and pushing them toward their full potential. I look forward to working closely with Luis and Frank to unlock the great values in both companies."
Leif Borge, current chief financial officer of Aker Solutions, will be CFO of Akastor. Svein Oskar Stoknes, who heads the subsea area's finance function, will take on the role as CFO of the new Aker Solutions. Synergies The new Aker Solutions will be streamlined to focus on the fast-growing deepwater and subsea oil-services markets and in areas with operational, commercial and strategic similarities. There will be a swifter realization of synergies as the subsea and field design areas share the same customers and main markets. The company will have a simpler strategy focused on value creation through technological development, organic growth and operational excellence. It will be uniquely positioned to design, equip, build and maintain the future subsea production factory and will build on its expertise within project execution and offshore field design.
"The new Aker Solutions will benefit from greater synergies and a more coordinated customer approach, leading to a stronger market position and higher and more predictable returns on capital," said Eriksen. The Akastor management team has extensive experience in developing companies and creating value through operations, restructuring and transactions. The company will provide a structure where the businesses Drilling Technologies, Aker Oilfield Services, Process Systems, Surface Products and Business Solutions will be developed as largely independent entities with management teams, boards of directors and strategies aimed at maximising their value. Each company will have greater strategic and transactional freedom because it will no longer be constrained by the competing needs of other businesses. The entities will be able to focus marketing efforts on core customers and invest strategically. Akastor will also hold financial and real estate assets representing about 20 percent of the company's balance sheet.
Drilling Technologies will be the largest business within Akastor, accounting for about 60 percent of the earnings and workforce.
"There is a strong industrial logic underpinning this move," Eriksen said. "The businesses that will make up Akastor have significant operational, technological and commercial differences that have prevented them from achieving synergies with the other businesses in Aker Solutions. Through this separation, we will be able to more fully realize the industrial and return potential of all our business areas and create value for our shareholders."
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Noble Corporation (NYSE: NE) has announced an update to its plan to spin-off Paragon Offshore. Noble expects to effect the spin-off as a dividend of 100 percent of the shares of Paragon Offshore to Noble's shareholders during the third quarter of this year.
As previously announced, Paragon Offshore will own and operate most of Noble's current standard specification drilling business, including five drillships, three semisubmersibles, 34 jackups, and one FPSO. The new company will also be responsible for the Hibernia platform operations. Noble will continue to own and operate its high-specification assets with particular operating focus in deepwater and ultra-deepwater market segments for drillships and semisubmersibles and harsh environment and high-specification segments for jackups.
David W. Williams, Chairman, President and Chief Executive Officer of Noble, said, "The spin-off of Paragon Offshore to our shareholders will be an important milestone in Noble's transformation and will allow each company to have a more focused business and operational strategy. The spin allows us to bring certainty to our shareholders and to both of the Noble and Paragon business organizations.
"I am excited for the future of both Noble and Paragon Offshore. Noble can move forward as an industry-leading high specification and deepwater drilling company, and Paragon Offshore can better leverage its fleet and substantial backlog to focus on the drivers of its particular business segment. In light of financial market conditions, both generally and with respect to the equity markets for offshore drilling companies, we decided to eliminate the initial public offering and accelerate the completion of the separation transaction.
"Each company will have capable assets and great talent that will allow the two fleets to be optimally marketed and operated for the benefit of all shareholders."
The spin-off, which is expected to be tax-free to shareholders, will be subject to approval by Noble's shareholders at the upcoming annual general meeting. Noble will also file a registration statement on Form 10, and the distribution will be subject to such registration statement being declared effective, as well as final board approval of the actual dividend and other customary matters.
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NYC-based PIRA Energy Group reports that the April rate of U.S. inventory increase is historic. In the U.S., stocks built while in Japan inventories drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
Another Huge U.S. Stock Build
Commercial oil inventories increased for the week ending April 18, following the stock increase for the week earlier. So far, the April rate of inventory increase is historic. It will substantially moderate for the rest of the month, but will still end up being a rather large inventory increase.
Japanese Inventories Draw Due to Lower Crude Stocks
Total commercial stocks drew due to a draw on crude. Finished product stocks were modestly higher. There is still demand impairment from the April 1st consumption tax increase, though that impact lessened this past week with modestly higher gasoline, gasoil, and kero demands. The indicative refining margin was modestly higher and margins remain good.
Rising Freight Rates Affect Markets
The pace of U.S. propane stock building is increasing, even as exports are sustained at high levels. Ethane usage is affected by cracker downtime, but will be increasing over the next couple of months. Freight rates keep increasing leading to weakening of spot arb margins while some cargoes are being redirected to shorter haul routes, as the emphasis shifts to more efficient operations.
Ethanol Prices Fall
U.S. ethanol prices dropped to the lowest level in over four weeks on April 16 as production rose to the highest level of the year. Values were significantly below gasoline again, after selling at a premium just two weeks ago.
Ethanol Output Declines
U.S. ethanol production fell to 910 MB/D during the holiday-shortened week ending April 18, down from an 18-week high 939 MB/D during the preceding week. Despite the decline, this was the third highest output thus far this year as the weather improved and logistical problems eased.
Nigeria: Risks to Oil Supply Disruptions and Long-Term Growth on the Rise
Risks to Nigerian crude supply are on the rise in both the near and long term. In the near term, oil infrastructure sabotage may increase ahead of the February 2015 elections, adding to existing oil theft and pipeline vandalism. In the longer term, growth remains challenged. Persistent insecurity has led to a broad exit of foreign oil companies from vulnerable areas, and a highly uncertain regulatory climate due to the long-delayed Petroleum Industry Bill has stalled investment in the deepwater.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
.NYC-based PIRA Energy Group Reports that on the week, U.S. commercial oil stocks built; the largest increase since 2009. Japanese crude stocks also built, while demand is still impaired. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
Commercial Oil Inventories Build W/W
Commercial oil inventories built 14.5 million barrel the week ending April 11, the largest weekly increase since 2009. Crude stocks gained 10 million barrels, the largest increase in over five years, with the SPR contributing just 0.6 million barrels to the increase. Crude stocks have now moved above 2013 levels for the first time this year, while all the main product categories are below last year.
Japanese Stocks Build, Demands Still Impaired
In Japan, total commercial stocks rose 4.6 MMBbls for the second straight week. Crude stocks built 2.7 MMBbls with finished products rising 1.5 MMBbls. All the major product stocks built, with the exception of naphtha. There is still demand impairment from the April 1st consumption tax increase, although the impact should soon begin to diminish. The indicative refining margin was modestly higher and margins remain good.
February Census Exports Clarify February U.S. Product Demand & Crude
The month-on-month decline in distillate and gasoline exports for February, 2014, as well as the EIA’s export plug used during the weeks of February, resulted in upward revisions to calculated February U.S. product demand. For distillate, February exports point to an upward demand revision close to what one would expect with the colder weather. For gasoline, February exports imply an added 190 MB/D to the demand rates reported in the weekly. Some of this demand growth could be a function of declining efficiency. On the crude oil side, exports of 240 MB/D during February reflected a continuation of the recent high level of crude exports to Canada.
Weaker Price Environment to Benefit Vessel Operators
PIRA expects a weaker price environment over the next five years will prove beneficial to vessel operators by reducing bunker costs from current levels. The flat prices for crude and products over the past several years have been stable as positive supply news from rapidly rising shale production has been nearly offset by continued supply disruptions both from OPEC and non-OPEC nations. Risks still remain to Iraqi, Libyan and Venezuelan crude supplies.
Rising Freight Rates To Alter Trade Flow
The shoulder season is seeing anticipated U.S. propane stock builds. Exports are active, but sharply rising freight rates will lead to some trade flow shifts in the weeks ahead. Ethane usage is being impacted by a relatively high level of cracker downtime. Overseas markets are seeing more LPG feed usage.
Ethanol Output Jumps W/W
U.S. ethanol production soared to an eighteen-week high 939 MB/D the week ending April 11 from 896 MB/D during the preceding week. This was the second highest output since January 2012 as the industry is finally breaking free of the frigid weather and logistical problems that have hampered operations over the past few months.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
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