London-listed explorer Cairn Energy is to sell its stakes in its Senegalese oil discoveries to Australian partner Woodside Energy, it said Sept. 7, as the UK company retrenches further.
Cairn had intended to sell its 40% stake in its Senegalese joint venture to Russia's Lukoil in a deal worth up to $400 million, but was pre-empted by Woodside, which took over as operator from US upstream company ConocoPhillips in a 2016 deal that prompted legal proceedings with Australian partner FAR, eventually resolved in February.
A final investment decision on the first phase of Sangomar, targeting an initial 230 million barrels, was taken in January 2020, with first oil expected in 2023. Total recoverable oil resources are estimated at 500 million barrels, with a gas pipeline to shore also envisaged.
Woodside is to buy the joint venture stake on the same terms as the proposed sale to Lukoil. Afterwards it will hold a 68.3% stake in the main Sangomar deepwater project and a 75% stake in the remaining "evaluation" areas, it said. It has rejected claims of any delay to the start of production resulting from COVID-19 and the oil price crash.
Cairn has been under pressure since the COVID-19 oil price collapse compounded the impact of a run of poor Norwegian drilling results last year, and in March said it was slashing its planned capital expenditure for this year by 23%. It drilled four "wild cat" exploration wells offshore Norway last year, all of which came up dry, before selling its remaining Norwegian assets in November.
The company derives funds from stakes in two producing UK oil fields, Catcher and Kraken, operated by Premier Oil and EnQuest respectively, with around a third of its expected production this year hedged at an price of $62/b, it said in March. It also has interests in Mexican exploration drilling in the south of the Gulf of Mexico.
Cairn said in March that it remained "well funded," noting a reserves-based lending facility with undrawn funds of $575 million and the potential to borrow more if needed.
In July it delayed publishing its first-half financial results until Sept. 29.
