Cairn Energy plc and partner Cheiron Petroleum Corp hope to purchase a portfolio of upstream oil and gas assets for US$646 million ($323m net to Cairn) in the Western Desert, onshore Egypt.
The acquisition of hydrocarbon production, development and exploration interests from Shell Egypt NV and Shell Austria GmbH (Shell) will have an additional contingent consideration of up to $280m ($140m net to Cairn) if certain requirements are met.
The news comes as Cairn announced it was to sell its assets in the North Sea.
Cairn’s wholly owned subsidiary, Capricorn Egypt, will acquire 50% of the assets, with the remaining 50% acquired by Cheiron.
The Aberdeen-based company said that the acquisition was in line with the group’s strategy of seeking to grow, diversify and extend its production base.
“The portfolio offers low cost production, near-term development and exploration potential, provides immediate operating cashflow contribution and adjusts our overall hydrocarbon split towards gas.”
The transaction adds working interest 2P reserves of 113 mmboe as at 31 December 2020.
It also has a low-cost 2021 forecast working interest production of between 33,000-38,000 boepd with an opex/bbl of <US$6/boe, with significant potential to increase production levels in future years.
Two thirds of production from the assets is gas weighted, which adjusts Cairn’s current hydrocarbon split towards gas.
The acquisition also enhances near-term growth opportunities with 2C contingent resources working interest of 49 mmboe as at 31 December 2020 to Cairn, with “significant exploration potential” remaining.
Cairn and its Egyptian joint venture partner plan to finance the acquisition with a new joint acquisition reserve-based lending facility of up to $350m, joint junior debt facility of $100m and existing cash on the balance sheet.
The economic effective date of the acquisition is 1 January 2020.
During 2020, production for the assets averaged 83,000 boepd (Cairn working interest of 41,500 boepd).