Cairn Energy, Cheiron to Buy Shell's Western Desert Assets in Egypt for $646 Million -- Update
March 09 2021 - 4:51AM
Dow Jones News
--Cairn, in consortium with Cheiron, has agreed to acquire
Shell's oil-and-gas portfolio in the Western Desert of Egypt for
$646 million upfront and up to $280 million in contingencies
--The group has also agreed a $460 million asset disposal in the
U.K., and said it is "taking all necessary steps" to realize the
$1.2 billion Indian damages award
--Cairn's 2020 net loss came in at $394 million
By Jaime Llinares Taboada
Cairn Energy PLC on Tuesday said that its consortium with
Cheiron Petroleum Co. has agreed to acquire Royal Dutch Shell PLC's
Western Desert assets in Egypt for $646 million.
The FTSE 250 energy company said Western Desert will expand and
diversify its producing asset base, as the deal is expected to add
33,000-39,000 barrels of oil equivalent a day in 2021--of which 66%
is gas. Cairn will acquire 50% of the assets and pay 50% of the
price.
There is an additional contingent consideration of up to $280
million if certain requirements are met. Cairn and Cheiron plan to
finance the acquisition with a new joint reserve-based lending
facility of up to $350 million, a joint junior debt facility of
$100 million, and existing cash. Completion is expected in the
second half of 2021, and is subject to shareholder consent.
"The portfolio offers low cost production, near-term development
and exploration potential, provides immediate operating cash flow
contribution and adjusts our overall hydrocarbon split towards
gas," Cairn said.
In addition, the company said it has agreed on the sale of its
20% interest in the Catcher field and 29.5% stake in the Kraken
field, U.K., for $460 million to Waldorf Production Ltd. This deal
also includes a contingent consideration which depends on oil
prices and production performance between 2021 and 2025.
The group said the disposal strengthens its balance sheet and
provides flexibility to sustain and prolong its producing asset
base. Completion is also expected in the second half of 2021.
The company added that it is taking all necessary steps to
ensure access to the $1.2 billion damages award payable to Cairn by
India's government.
"Cairn is extremely confident that satisfaction of the award
will be achieved either by negotiated settlement or by enforcement
against Indian assets (with potential financing and risk-sharing
options available to accelerate access to cash recovered through
enforcement)," it said.
The company reported a net loss of $393.8 million for 2020
swinging from a $93.6 million net profit a year earlier. Lower
production and energy prices hurt its performance during the
year.
At 0919 GMT, shares in Cairn were down 3.5% at 191.7 pence.
Shell was up 1.7% at 1,572.2 pence.
Write to Jaime Llinares Taboada at jaime.llinares@wsj.com;
@JaimeLlinaresT
(END) Dow Jones Newswires
March 09, 2021 04:36 ET (09:36 GMT)
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