27th Jul 2020 09:23
(Alliance News) - Cairn Energy PLC on Monday said it has agreed to sell its Senegal interests to Russia's Lukoil and pay a special dividend with the cash received.
The oil & gas exploration company announced it has entered into an agreement to sell its entire 40% interest in the Rufisque offshore, Sangomar offshore and Sangomar deep offshore contract area for a cash sum of up to USD400 million to Moscow-based oil & gas company PJSC Lukoil, expected to be completed in the fourth quarter of 2020.
Of the USD400 million, USD300 million is expected in cash on completion, including reimbursement of capital expenditure made by Cairn since January 1.
A further USD100 million is contingent on the timing of first oil from the contract area as well as the average Brent oil price during the first six months of production.
The transaction will leave Cairn with strong financial flexibility, it said, which is much needed in the current climate and uncertain oil market conditions. It will eliminate the need for significant capital expenditure in a multi-year development, with its requirement for additional financing, Cairn Energy said.
The completion of the sale is dependent on the consent of joint venture partners, including Perth-based Woodside Energy Ltd, FAR (Senegal) Ltd and Senegal state-owned Petrosen, as well as the government of Senegal.
Cairn Energy Chief Executive Simon Thomson said: "We are proud of what Cairn has achieved in Senegal. Our discoveries were the country's first deep-water wells and opened up a new basin play on the Atlantic Margin.
"What's more, they successfully laid the foundations for Senegal's first oil and gas development, which will deliver enduring benefits to its people."
Following the transaction, Cairn Energy said it intends to return at least USD250 million of the proceeds as a special dividend to its share holders.
Cairn Energy shares were up 7.3% at 133.60 pence each on Monday morning in London.
"Entering the project with already explored reserves at early stage of their development is fully in line with our strategy and allows us reinforcing our presence in West Africa," said Lukoil President Vagit Alekperov. "Joining the project with qualified international partners will allow us to gain additional experience in development of offshore fields in the region."
By Greg Roxburgh; [email protected]
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