27 Jul 2020
Sale of Senegal interests and planned special dividend of at least US$250 million
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, OR INTO, THE UNITED STATES, CANADA,
AUSTRALIA OR JAPAN
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Cairn is pleased to announce that it has entered into an agreement to sell to LUKOIL its entire 40 per cent interest in the Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore (RSSD) Contract Area, including the Sangomar development, offshore Senegal, for a cash consideration of up to US$400 million (m) plus reimbursement of development capital expenditure incurred since 1st January 2020. Following Completion, Cairn intends to return at least US$250m to shareholders.
The Transaction, which follows a comprehensive sales process, is consistent with Cairn’s disciplined approach to portfolio management and capital allocation, and its long-term strategy to return capital to shareholders. It will also enhance the Group’s financial flexibility to sustain and grow a balanced and robust portfolio during the current challenging and uncertain oil market conditions.
Transaction Highlights
- Cairn to sell its entire 40 per cent interest in the RSSD assets to LUKOIL with effective date of 1st January 2020, subject to required JV partner and government of Senegal consents;
- Completion currently expected in Q4 2020;
- Cash consideration payable on Completion of US$300m plus working capital adjustments including reimbursement of development capital expenditure incurred since 1st January 2020 (Cairn’s net capex guidance for Sangomar in 2020 is US$330m);
- Further contingent consideration of up to US$100m, dependent on the timing of first oil and the average Brent oil price during the first six months of production;
- Realises value and reduces concentration of development risk, financing risk and the need for significant capital expenditure over four years;
- Further strengthens Cairn’s balance sheet and provides flexibility to invest in and grow the business; and
- Intention to provide a substantial and certain return of capital to shareholders of at least US$250m by special dividend following Completion, consistent with Cairn’s approach to capital allocation.
Simon Thomson, Chief Executive of Cairn said:
“We are proud of what Cairn has achieved in Senegal. Our discoveries were the country’s first deep-water wells and opened up a new basin play on the Atlantic Margin. What’s more, they successfully laid the foundations for Senegal’s first oil and gas development, which will deliver enduring benefits to its people.
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.
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.
We will work closely with the Government of Senegal, LUKOIL and joint venture partners to ensure the transaction is completed as soon as possible.”
Circular
The disposal is a Class 1 transaction and subject to shareholder approval. Cairn will publish a circular to shareholders in due course setting out further details of the Transaction and convening the General Meeting, at which shareholder approval will be sought for the Transaction.
Rothschild & Co is acting as sponsor and financial advisor to Cairn in connection with the Transaction.
Jefferies International Limited is acting as financial advisor to Cairn in connection with the Transaction.
This summary should be read in conjunction with the full text of this announcement. Capitalised terms used in this announcement have the meanings given to them in the Appendix.
Enquiries:
Analysts/Investors
David Nisbet, Corporate Affairs
Tel: 0131 475 3000
Media
Linda Bain, Corporate Affairs
Tel: 0131 475 3000
Patrick Handley/David Litterick
Brunswick Group LLP
Tel: 0207 404 5959
There will be a live audio webcast of the conference call being held to discuss the transaction at:
9am on Monday 27 July 2020
This can be accessed directly via https://brrmedia.news/p8ml3.
If you would like to join the conference call to ask a question, you can do so by dialling:
+44 33 0606 1122 and by entering room number 077072 and then PIN code 0660.
NOTES TO EDITORS
The information contained within this announcement is deemed by Cairn to constitute inside information as stipulated under the MAR. By the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of Cairn is Mr James Smith, Chief Financial Officer.
Disclaimers
This announcement has been issued by and is the sole responsibility of Cairn. The information contained in this announcement is for information purposes only and does not purport to be complete. The information in this announcement is subject to change.
This announcement has been prepared in accordance with English law, the MAR and the Disclosure Guidance and Transparency Rules and Listing Rules of the FCA and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.
M. Rothschild & Sons Limited (“Rothschild & Co”), which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for Cairn and for no-one else in connection with the contents of this announcement and the Transaction and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than Cairn for providing the protections afforded to clients of Rothschild & Co nor for providing advice in connection with the contents of this announcement or the Transaction or any transaction, arrangement or other matter referred to in this announcement.
The contents of this announcement are not to be construed as legal, business or tax advice. Each Shareholder should consult their own legal adviser, financial adviser or tax adviser for legal, financial or tax advice respectively.
Cautionary Note Regarding Forward-looking Statements
This announcement includes certain forward-looking statements with respect to the financial condition, results of operations and business of the Group and certain plans and objectives of the Board. These forward-looking statements can be identified by the fact that they do not relate to any historical or current facts. Forward-looking statements often use words such as ''proposed'', ''anticipate'', ''expect'', ''estimate'', ''intend'', 'plan'', ''believe'', ''will'', ''may'', ''should'', ''would'', ''could'' or other words with a similar meaning. These statements are based on assumptions and assessments made by the Board in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes appropriate. By their nature, forward-looking statements involve risk and uncertainty and there are a number of factors that could cause actual results and developments to differ materially from those expressed in, or implied by, such forward-looking statements.
These forward-looking statements speak only as at the date of this announcement. Save as required by the requirements of the Listing Rules or the Disclosure Guidance and Transparency Rules of the FCA or otherwise arising as a matter of law or regulation, Cairn expressly disclaims any obligation or undertaking to disseminate after publication of this announcement any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Neither the content of Cairn's website (or any other website) nor the content of any website accessible from hyperlinks on Cairn's website (or any other website) is incorporated into or forms part of this announcement.
Unless otherwise indicated, all references in this announcement to all references to ''US dollars'', ''US$'' and ''US cents'' are to the lawful currency of the United States.
About Cairn Energy PLC
Cairn is one of Europe's leading independent oil and gas exploration and development companies and has been listed on the London Stock Exchange for 30 years. Cairn has explored, discovered, developed and produced oil and gas in a variety of locations throughout the world as an operator and partner in all stages of the oil and gas lifecycle.
Cairn’s exploration activities have a geographical focus in the North Sea, West Africa and Latin America, underpinned by interests in production and development assets. Cairn has its headquarters in Edinburgh, Scotland supported by operational offices in London, Senegal and Mexico.