Cairn Energy exits Senegal oil field project via US$400mln LUKOIL deal

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

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

It sees Cairn receive US$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 will have an effective date of January 1st 2020 and is expected to complete in the fourth quarter.

Once complete, Cairn is to immediately return US$250mln of the proceeds to shareholders via a special dividend.

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

“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,” said Simon Thomson, Cairn chief executive.

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

Source: proactiveinvestors.co.uk