Cheiron Petroleum Corporation has agreed to purchase 50% of Shell’s upstream oil and gas interests in the Western Desert, according to press release. The remaining 50% of the interests will be purchased by Cheiron’s strategic partner, Cairn Energy plc, a new entrant into the Egyptian upstream.
Cheiron, Egypt’s largest independent Exploration and Production company, will operate the production and development concessions in the asset portfolio, using the experience gained over three decades of improving safety, production, reserves and cost management performance in its Egyptian fields. These are located onshore in the Western Desert and Nile Delta, and offshore in the Gulf of Suez and Mediterranean Sea.
According to the statement, Cairn, a UK listed company with significant international experience and exploration expertise, will operate three of the exploration licenses. The field activities will continue to be managed by the Bapetco Joint Operating Company.
“The consideration to be paid for the interests is circa $323 million (net Cheiron) with additional contingent payments of up to $140 million (net Cheiron) depending on oil price and exploration success. The consideration will be subject to customary working capital adjustments for the period between the effective date of the transaction (1 January 2020) and the completion date,” the statement added.
The acquisition is expected to add Proven plus Probable reserves of 113 mmboe and production of approximately 40 kboepd (as at 31 December 2020) to the Cheiron business on a working interest basis.
David Thomas, Cheiron’s Chief Executive Officer, commented on the acquisition: “Cheiron is a committed investor in Egypt and believes in the long term strength of the country’s energy sector, reflecting the Government’s sustained efforts to create an attractive business climate and bring new, high quality investors into the country.”
“We are therefore pleased to announce the acquisition of Shell’s Western Desert portfolio. We are also delighted to have formed a new strategic partnership with Cairn and to have the opportunity to work with Bapetco, one of the pre-eminent and most successful companies in the country. Cheiron and Cairn have highly complementary industry skills and experience and the partnership will add material value to the concessions through the pursuit of a range of growth opportunities, from mature field production optimization to new exploration initiatives,” Thomas added.
Funding for the acquisition will be provided by a strong syndicate of nine International European, Middle Eastern and African Banks and Lenders, and advisory support has been provided to the partnership by Rothschild & Co and Gaffney Cline & Associates.
The asset sale is subject to Government and Partner approvals and is expected to complete in the second half of 2021.