Shell strikes US$926 million deal

Cairn Energy Plc reshuffled its portfolio, selling US$460 million of assets in the UK North Sea and buying projects in Egypt’s Western Desert from Royal Dutch Shell Plc.

 

Both deals, announced on the 9th Marh and seen completing in the second half of 2021, follow a pick-up in oil and gas acquisitions after 2020’s pandemic-driven slump.

 

Cairn’s retreat from the North Sea comes after several other international producers have withdrawn from the aging region. Meanwhile its purchase in Egypt enables Shell to chalk up proceeds in an ongoing divestment programme.

 

“Cairn needed to rejuvenate its investment case, and this move does that,” Al Stanton, an analyst at RBC Capital Markets, said in a note.

 

“However, shareholders are faced with a steep learning curve” and Egyptian assets typically provide “limited oil-price leverage.”

 

Cairn tumbled as much as 7.4% in London trading, and was down 4.2% at 190.3 pence as of 11:07 am local time.

 

The deal in Egypt, back on after delays last year, consists of Shell’s interest in 13 onshore concessions and in Badr El-Din Petroleum Company.

 

The UK’s Cairn, together with Cairo-based Cheiron Petroleum Corporation, will buy the assets for US$646 million and make additional payments of as much as US$280 million by 2024, “contingent on the oil price and the results of further exploration,” Shell said in a statement.

 

The deal “will enable Shell to concentrate on its offshore exploration and integrated value chain in Egypt, including seven new blocks in the Nile Delta, West Mediterranean and Red Sea,” the Anglo-Dutch oil major said.

 

Cairn, in turn, is selling its stakes in the UK’s Catcher and Kraken fields to Waldorf Production UK. Ltd for US$460 million with a further uncapped contingent consideration dependent on oil-price and production performance. The fields are moving “into decline phase,” the company said.

 

Cairn will keep some exploration operations in the North Sea, including the Nelson project in partnership with Shell.

 

Waldorf, which made its first investment in the region just over a year ago, said on the 9th March that the North Sea is “uniquely suited” for smaller players. In addition to Cairn’s assets it’s also buying stakes in exploration blocks from Delek Group Ltd’s Ithaca unit, including the Fotla prospect.

 

Source: Rigzone