Russian oil company Lukoil has signed an agreement with Cairn Energy to acquire a 40% interest in the Rufisque, Sangomar and Sangomar Deep) - RSSD - project offshore Senegal for $300 million in cash.
The agreement also provides for potential bonus payments to Cairn Energy PLC of up to $100 mln after the start of production from the blocks. The deal will see Cairn exit the project entirely, subject to required JV partner and government of Senegal consents.
The blocks of the project covering 2,212 sq. km are located on the deepwater shelf of Senegal 80 km from the shore with the sea depth of 800-2,175 meters. The blocks include two discovered fields: Sangomar and FAN.
The $4.2 billion Final Investment Decision (FID) on the Sangomar field was taken at the start of 2020 and the field development has kicked off.
The recoverable hydrocarbon reserves of the Sangomar field total approximately 500 million boe. The field is planned to be brought online in 2023 via a Modec-supplied FPSO.
Cairn had in March said it was confident it would be able to meet its share of expenditure for the project and maintain "current" equity levels in the project, however, the company is now exiting the project in full.
The company said that apart from the sale price of up to US$400 million, the deal includes reimbursement of development capital expenditure incurred by Cairn since January 1, 2020.
Cairn said Monday that the sale realized the value and reduced the concentration of development risk, financing risk, and the need for significant capital expenditure over four years [to develop the Sangomar field].
The project is operated by Australia's Woodside with a 35% stake. Other participants are FAR (15%) and state-owned company Petrosen (10%).
Worth noting, Australia's FAR might also need to sell its stake in the project as the company last month defaulted on its obligations to the Sangomar joint venture.
Completion in Q4
Commenting on the deal with Cairn, Vagit Alekperov, President of PJSC LUKOIL said: "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. Joining the project with qualified international partners will allow us to gain additional experience in development of offshore fields in the region", said
The completion of the transaction is expected in the fourth quarter of 2020.
Cairn said it planned to provide "a substantial and certain" return of capital to shareholders of at least US$250m by a special dividend following the completion of the transaction.
Simon Thomson, Chief Executive of Cairn 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."
"With a strong balance sheet, low breakeven production, and limited capital commitments, Cairn will have enhanced financial flexibility to invest in and grow the business whilst always remaining committed to returning excess cash to shareholders," he said.
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