Cairn sells 40% share to Lukoil, page-60

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Cairn Energy exits Senegal oil fieldproject via

US$400mln LUKOIL deal

It plans to returnUS$250mln to shareholders with a special dividend payment.

Cairn Energy PLC (LON:CNE) has agreed to sell its offshore Senegal assets to LUKOIL for US$400mln in cash.

The deal is forCairn’s 40% interest in the RSSD (Rufisque Offshore, Sangomar Offshore andSangomar Deep Offshore) contract area which is host to the Sangomar discoverywhich is to be Senegal’s first oil field development.

It sees Cairn receiveUS$300mln upfront and a further contingent US$100mln linked to Sangomar’s’first oil’ and the average oil price in the first six months of production.

The transaction willhave an effective date of January 1st 2020 and is expected to complete in thefourth quarter.

Once complete, Cairnis to immediately return US$250mln of the proceeds to shareholders via aspecial dividend.

Cairn highlighted toinvestors that the disposal removes its exposure to significant fielddevelopment spending over the next four years, as well as strengthening itsbalance sheet and creating flexibility for future investment and growth.

“With a strong balancesheet, low breakeven production and limited capital commitments, Cairn willhave enhanced financial flexibility to invest in and grow the business whilstalways remaining committed to returning excess cash to shareholders,” saidSimon Thomson, Cairn chief executive.

“The planned special dividend from the sale of the Sangomarasset reflects Cairn's long-standing strict capital allocation strategy ofactive portfolio management and returning cash to shareholders.”

LukoilEnters Senegal’s

Sangomar Offshore Oil Project

By Thomas Hedley, Field Editor on July 27, 2020

Russian independentoil and gas company Lukoil announced on Monday it has reached a deal withScottish Cairn Energy for its 40% stake in the Rufisque, Sangomar and SangomarDeep (RSSD) licenses.

Two oil fields havebeen uncovered on those licenses, Sangomar and FAN. While FAN has not yet beenproved to be commercially viable, Sangomar is currently under development andis set to produce first oil in 2023. The final investment decision was taken inJanuary this year and the field is said to contain up to 500 million barrels ofoil equivalent.

Lukoil will pay $300million in cash to Cairn Energy according to the deal, with a potential bonusof up to $100 million once production has started. Furthermore, Lukoil will payfor costs incurred since January 1, 2020. Its share of the 2020 budget is $330million. Cairn Energy stated its intention to pay at least $250 million to itsshareholders via a special dividend.

According to CairnEnergy’s CEO Simon Thomson: “The planned special dividend from the sale of theSangomar asset reflects Cairn’s long-standing strict capital allocationstrategy of active portfolio management and returning cash to shareholders.”

The deal is not yetfully confirmed as government approval is yet to come. Parties expect theagreement to be fully complete by the fourth quarter of this year.

Lukoil’s presidentVagit Alekperov said acquiring a project “with already explored reserves atearly stage of their development is fully in line with our strategy and allowsus [to reinforce] our presence in West Africa. Joining the project withqualified international partners will allow us to gain additional experience indevelopment of offshore fields in the region.”

Thearea is operated by Perth-based Woodside with a 35% stake. Fellow Australianindependent exploration company FAR holds a 15% stake, while Senegal’sstate-owned Petrosen holds the remaining 10%.