Cairn sells stakes in two UK fields, buys Shell assets in Egypt

Oil and gas company Cairn Energy has made two asset deals, one for the sale of its interests in the Catcher and Kraken fields, located off the UK, and the other for the purchase of a portfolio of Shell’s assets in Egypt.

Cairn said on Tuesday it has entered into an agreement that will result in the sale of its interests in the UK Catcher and Kraken fields to Waldorf Production for a cash consideration of $460 million plus additional contingent consideration dependent principally on oil prices from 2021 to the end of 2025.

The consideration is subject to adjustments for working capital and other customary interim period adjustments from the economic effective date of 1 January 2020.

Under the deal, Cairn will sell its entire 20 per cent interest in the Catcher field and 29.5 per cent interest in the Kraken field for a firm consideration of $460 million.

The Catcher field is operated by Premier Oil, which is currently in the process of merging with Chrysaor, and the Kraken field is operated by EnQuest.

Cairn added that the additional uncapped contingent consideration is dependent on oil prices and production performance from 2021 to the end of 2025: generating ~$75 million at $60 Brent and ~$125 million at $65 Brent.

The completion is currently expected in H2 2021. The disposal is a Class 1 transaction and subject to shareholder approval.

Simon Thomson, Chief Executive of Cairn said: “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”.

Erik Brodahl, Chief Executive Officer of Waldorf Production, said: “We are excited to acquire Cairn’s interests in the high-quality Catcher and Kraken producing fields. This is a transformational transaction for the company, with average production from the combined company growing to c.22,000 – 25,000 boe per day and 2P reserves of 43 million boe”.

Waldorf has also agreed to acquire a 20 per cent interest in Block 22/1b and a 15 per cent interest in Block 22/1a from Ithaca Oil and Gas.

The former license contains the exciting Fotla prospect, where an exploration well is expected to be drilled in 2Q 2021.

In a separate statement on Tuesday, Cairn announced the proposed acquisition of a portfolio of upstream oil and gas production, development and exploration interests from Shell Egypt NV and Shell Austria GmbH in the Western Desert, onshore Egypt.

The deal was made for a purchase price of $646 million ($323 million net to Cairn), with additional contingent consideration of up to $280 million ($140 million net to Cairn) if certain requirements are met.

Capricorn Egypt, a wholly-owned subsidiary of Cairn, will acquire 50 per cent of the assets, with the remaining 50 per cent acquired by Cheiron.

Through this deal, Cairn adds a working interest 2P reserves of 113 mmboe as at 31 December 2020.

Two-thirds of production from the assets is gas weighted, adjusting Cairn’s current hydrocarbon split towards gas.