Cairn Energy unveils major deals - including disposal of North Sea assets

Cairn Energy has unveiled two major deals – including the sale of its stakes in the UK Catcher and Kraken oil fields in the North Sea – that it says will drive a “step-change” in the scale and growth potential of the business.

Tuesday, 9th March 2021, 4:13 pm
Updated Tuesday, 9th March 2021, 6:00 pm
Cairn is offloading its 20 per cent interest in the Catcher field in the North Sea. Picture: contributed.

Regarding the disposal, Cairn is offloading its 20 per cent interest in the Catcher field and 29.5 per cent interest in the Kraken field to Waldorf Production UK for $460 million (£331m) – saying the deal comes as the assets “fall into natural decline”.

The Edinburgh-based oil and gas explorer and producer is also snapping up Shell's Western Desert assets in Egypt. It intends to buy 50 per cent of Shell's production, development and exploration upstream interests in the area for $323m net to Cairn, with additional contingent consideration of up to $140m net to Cairn if certain requirements are met. The rest of the interests will be acquired by Cairn's consortium partner Cheiron.

Both the North Sea and Egyptian deals are expected to complete in the second half of this year, subject to the relevant approvals.

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Chief executive Simon Thomson said: "As we continue to live and work with the consequences of the global pandemic, we have focused on keeping our people safe while maintaining momentum on business priorities and returning value to shareholders.

“The proposed acquisition of Shell's Western Desert assets in Egypt is an important step in our strategic ambition to expand and diversify our producing asset base, bringing material reserve and production additions and offering exploration potential in a country with significant oil and gas growth opportunities. Our joint venture with established Egyptian operator Cheiron Petroleum Corporation creates a strong partnership with extensive experience and complementary skill sets.

“We are also announcing today the proposed sale of our interests in the UK Catcher and Kraken fields. The divestment of these assets, as they fall into natural decline, will further strengthen our ability to pursue Cairn's strategic goals.”

He also addressed the firm’s $1.2 billion arbitration award against India, saying that the Scottish firm has engaged with the Government of India regarding adherence to the ruling and we are pursuing all avenues to protect our shareholders' rights to the value of the award”.

The updates came as Cairn reported a loss after tax for 2020 of $394m, swinging from a profit of $94m, including loss on disposals of $276m, and no recognition of gain regarding the arbitration award.

Net oil production averaged just over 21,000 barrels of oil per day, in line with guidance and down from 23,000 in the previous year, while oil and gas sales revenue amounted to $324m, down from $504m.

Looking ahead, it stated: “As a result of the transactions announced today, Cairn will deliver a step-change in the scale and growth potential of the business with the planned material expansion and diversification of our production profile.

"The broadening of Cairn's production base will provide the funding and cash flow to support selective exploration activity, with wells in Egypt, the UK and Mexico during 2021.”

The firm was founded by Sir Bill Gammell in 1980 and listed on the London Stock Exchange in 1988. It also notes that it participated in the development of Catcher and Kraken, which began production in 2017.

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