COPENHAGEN - Norway's Vaar Energi said on Tuesday it will buy smaller Oslo-listed rival BlueNord to form Europe's largest independent oil and gas producer in a deal worth around $1.33-billion that sent shares in both companies up more than 5%.

Vaar Energi, majority owned by Italy's Eni, currently focuses on Norwegian oil and gas production, while BlueNord's assets are located on Denmark's continental shelf.

"We want to continue to grow ... I still think there are opportunities to consolidate in Norway, but at some point it becomes natural that we start to look outside," Vaar CEO Nick Walker told journalists during a call.

"Going to Denmark is a similar risk profile as we have in Norway, similar characteristics, and I think it's a very complementary transaction," he said.

Shares in Vaar traded up 5.5% by 07:45 GMT, while BlueNord's rose 6.1%.

The new group will have a long-term production target of around 450 000 barrels of oil equivalent a day (boed), Vaar said, with Vaar contributing between 390 000 boed and 410 000 boed and BlueNord predicting it will produce 45 000 boed.

Vaar said it had set a long-term goal of maintaining output at around 450 000 boed, although it could also continue to grow via additional acquisitions.

Norwegian rival Aker BP said last week it aims to produce between 380 000 boed and 400 000 boed this year, but with plans to increase this in the coming years as new fields come on stream.

Under the deal, BlueNord owners will receive 248.4-million new Vaar Energi shares and 1.96-billion Norwegian crowns ($202.95-million) in cash, equating to 9.7153 shares in Vaar Energi and 76.83 crowns in cash for each share held in BlueNord, the companies said.

The transaction valued BlueNord at 12.84-billion Norwegian crowns when measured at Monday's closing price for the Vaar Energi share, equivalent to $1.33-billion, according to a Reuters calculation.

VAAR INCREASES SECOND-QUARTER DIVIDEND TO $350-MILLION

The boards of directors of both Vaar Energi and BlueNord have approved the deal and consider it in the best interests of each company and their respective shareholders, they said.

Vaar estimated annual financial synergies from the transaction of between $250-million and $300-million in the form of lower financing costs, reduced overheads and a strengthened gas sales portfolio.

As a result, Vaar intends to increase the overall dividend payment for the second quarter of 2026 to $350-million from $300-million previously, it said.

Eni said it will remain a long-term majority shareholder in the new group, while BlueNord's current owners will hold a 9.05% stake.

Oslo-listed Vaar Energi separately reported an 87% year-on-year rise in April-June earnings before interest and taxes to $2.24-billion on Tuesday, matching the average $2.3-billion forecast in a company-compiled poll of 12 analysts.