Cairn Energy PLC strikes deals to exit North Sea and acquire producing assets in
Alongside a new Egyptian partner, Cairn is acquiring substantial gas-weighted production which is said to have significant potential for growth
() is exiting the North Sea with a US$460mln asset sale and switching into Egypt where it has separately struck an acquisition deal with PLC ().
It is selling its entire 20% in the Catcher field and its 29.5% stake in the Kraken field to private firm Waldorf Production Ltd for US$460mln plus future add-ons subject to Brent oil prices.
“The divestment of our UK producing assets as they move into decline phase, will further strengthen our ability to pursue Cairn’s strategic goals and position the company robustly for the decade ahead,” said Simon Thomson, Cairn chief executive.
Switching to Egypt, Cairn is acquiring Shell’s interests in the Western Desert.
Cairn is teaming up with new Egyptian partner Cheiron to jointly acquire Shell’s exploration, development and production interests in the Western Desert. Together they are paying US$646mln, US$323mln each, plus up to US$280mln (US$140mln net) of future contingent payments.
The Egyptian portfolio comprises some 21 development leases and last year yielded some 83,000 barrels of oil equivalent per day (boepd) gross.
For 2021, it is forecast to provide Cairn with some 33,000 to 38,000 boepd at a low cost (US$6 per barrel).
The assets are said to have significant potential to grow production in future years. They comprise some 113mln barrels of proved and probable reserves at the end of December, though Cairn highlights ‘near term growth opportunities’ and significant remaining exploration potential.
Cairn highlighted that the to-be-acquired assets are gas weighted, about two thirds, and they generate significant cash flow (averaging US$140mln per year over the past three years).
The company said that the transaction is in line with its core strategic objectives – a sustainable production base across multiple fields and relevant against the backdrop of global energy transition.
CEO Thomson added: “The proposed acquisition of Shell’s Western Desert assets in Egypt is an important step in our strategic ambition to expand and diversify our producing asset base, bringing material reserve and production additions and offering significant exploration potential.
“We are delighted to be entering a country that has significant oil and gas growth opportunities where the government has created an attractive environment for inward investment.
“Our joint venture with established Egyptian operator Cheiron creates a strong partnership with extensive experience and complementary strengths across the upstream value chain.”
Separately this morning, Cairn also released full-year results for 2020 which saw the company report a US$394mln loss after tax – including the realisation of a US$276mln loss on the value of asset disposals.
The operating loss was reported at US$67mln while it had a net cash inflow of US$239mln from oil and gas production.
Production revenue amounted to US$324mln and the company ended December with US$570mln of cash.
Net oil production averaged 21,000 boepd for the year, which was in line with guidance.
During the period, Cairn sold its interests in Norway and Senegal.
It also continued to progress its arbitration with India, notably it was awarded US$1.2bn plus interest and costs in December. In today’s outlook statement the company highlighted that it has continued engagement with the Government of India over the award and all necessary steps are being taken to ensure access to the value of the award for shareholders.
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