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DONG Energy settles platform dispute, clears hurdle for oil unit sale

Reuters - UK Focus

COPENHAGEN, May 4 (Reuters) - DONG Energy (LSE: 0RHE.L - news) said it has reached a settlement with Daewoo Shipbuilding & Marine Engineering and Technip (LSE: 0IEB.L - news) over who bears responsibility for construction errors concerning an offshore platform for the idled Hejre field.

The settlement clears a major hurdle for the Danish company's plans to divest its oil and gas unit to focus on its growing business of developing offshore wind farms.

DONG said in a statement that the agreement will reduce the 2.5 billion Danish crowns ($367 million) of provisions it made in relation to the Hejre field ahead of its listing, which was one of the largest in the world last year.

It will also have a positive impact of around 900 million crowns on operating profit in DONG's Discontinued Operations, the company said, a business area not included in its financial guidance for the full year.

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"It is a significantly better deal than what they had dared to hope for when they made the provisions," Sydbank (LSE: 0MGE.L - news) analyst Morten Imsgard said.

"It is also positive with regards to taking the sale (of the oil and gas unit) further as you don't have to discuss an additional risk now," Imsgard said.

DONG said it was uncertain whether the Hejre project, which was halted more than a year ago, would resume. It estimates the field holds 171 million barrels of oil equivalents.

"The settlement does not affect the ongoing assessment with Bayerngas on re-development alternatives for the Hejre field," DONG said.

DONG reiterated last week that it expects to divest the oil and gas unit this year.

Independent oil exploration company Cairn Energy (LSE: CNE.L - news) and Danish shipping and oil conglomerate A. P. Moller-Maersk have been mentioned by sources familiar with the matter as being among potential buyers for the oil and gas interests, which could be worth around $2 billion.

($1 = 6.8066 Danish crowns) (Reporting by Stine Jacobsen and Teis Jensen; Editing by Susan Fenton)