Cairn Energy and Cheiron to Acquire Shell's Western Desert Assets
Cairn Energy Plc and Cheiron Petroleum Corp. have entered into a Sale and Purchase Agreement (SPA) with subsidiaries of Royal Dutch Shell Plc to acquire their portfolio of onshore production and exploration assets in Egypt’s Western Desert, for a total consideration of US$646 million, plus certain additional contingent payments.
In October 2019, Shell had announced plans to market its portfolio of interests in the Western Desert in order to fully concentrate on growing its Egyptian offshore exploration and integrated gas business.
Capricorn Egypt Ltd., a wholly-owned subsidiary of Cairn, will acquire 50% of the assets, with the remaining 50% acquired by Cheiron. Badr El Din Petroleum Company (BAPETCO), a 50:50 joint venture between Shell and state-owned Egyptian General Petroleum Corp. (EGPC), currently holds interests in 8 producing concessions. In addition, Shell also holds a 100% operated interest in 5 exploration concessions.
BAPETCO’s assets include a 100% interest in the Obaiyed, North Umbaraka, Badr el Din (BED) Fields, Sitra, North Alam El Shawish, and North Matruh, a 52% interest in North East Abu Gharadig, and a 40% interest in Alam El Shawish. The other exploration assets being acquired include Shell’s 100% operated interests in South East Horus, West El Fayum, and South Abu Sennan.
Under the terms of the SPA, Cairn and Cheiron will acquire a 50% share each of Shell’s assets for a total consideration of US$646 million (US$323 million net to each company), subject to working capital and other customary adjustments between the effective date of January 1st, 2020, and the completion date. Additionally, a contingent consideration of up to US$280 million is also payable by buyers.
A part of the PICO Group, Cheiron Petroleum is headquartered in Cairo, Egypt. The company is engaged in the exploration, development and production of oil & gas in Egypt, Romania and Mexico.
Edinburgh-based Cairn Energy holds a portfolio of exploration, development and production assets with interests in the UK and Norway and along the Atlantic Margin including Senegal, Mexico, Nicaragua, Suriname, Côte d’Ivoire, Mauritania and the Republic of Ireland.
“Today’s announcement is consistent with Shell’s efforts to shift our upstream portfolio to one that is more focused, resilient and competitive. The deal will deliver value to Shell and to Egypt. It 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,” said Wael Sawan, Upstream Director of Shell.
Rothschild & Co. and GaffneyCline are acting as advisors to Cairn and Cheiron on the transaction.
The transaction is subject to customary closing conditions, including regulatory, partner and shareholder approvals, and is expected to be completed in H2-2021.