Cairn to Acquire Shell’s Western Desert Stakes

Tuesday, March 9, 2021

Cairn, together with Cheiron (its consortium partner), announced the proposed acquisition of a portfolio of onshore upstream oil and gas production, development and exploration interests from Shell Egypt NV and Shell Austria GmbH in Egypt’s Western Desert, for a purchase price of $646 million (US$323 million net to Cairn), with additional contingent consideration of up to $280 million (US$140 million net to Cairn) if certain requirements are met.

Capricorn Egypt, a wholly owned subsidiary of Cairn, will acquire 50% of the Assets, with the remaining 50% acquired by Cheiron. The Acquisition is in line with Cairn’s strategy of seeking to grow, diversify and extend its production base. The portfolio offers low-cost production, near-term development and exploration potential, provides immediate operating cashflow contribution and adjusts our overall hydrocarbon split towards gas.

Simon Thomson, Chief Executive of Cairn said: “The proposed acquisition of Shell’s Western Desert assets in Egypt is an important step in our strategic ambition to expand and diversify our producing asset base, bringing material reserve and production additions and offering significant exploration potential.

“We are delighted to be entering a country that has significant oil and gas growth opportunities where the Government has created an attractive environment for inward investment. Our Joint Venture with established Egyptian operator Cheiron creates a strong partnership with extensive experience and complementary strengths across the upstream value chain.”

Transaction Highlights

Adds working interest 2P reserves of 113 mmboe as at 31 December 2020
Adds low-cost 2021 forecast working interest production of between 33,000-38,000 boepd with an opex/bbl of <US$6/boe, with significant potential to increase production levels in future years
Two-thirds of production from the Assets is gas weighted, adjusting Cairn’s current hydrocarbon split towards gas
Significant Cashflow from Operations (CFFO) contribution: average CFFO1 for previous three reported years (2017 – 2019) was ~US$140 million net to the interests being acquired by Cairn
Enhances near-term growth opportunities with 2C contingent resources working interest of 49 mmboe as at 31 December 2020 to Cairn and significant exploration potential remaining
Cairn, together with Cheiron, plans to finance the Acquisition with a new joint acquisition reserve-based lending facility of up to US$350 million, joint junior debt facility of US$100 million and existing cash on balance sheet
The economic effective date of the Acquisition is 1 January 2020. Production for the assets being acquired averaged 83,000 boepd (Cairn working interest of 41,500 boepd) in 2020

1 Cashflow from operations is a non-IFRS measure and excludes working capital movements. CFFO is presented in order for readers to understand the cash profitability.

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Cairn to Acquire Shell’s Western Desert Stakes

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Cairn to Acquire Shell’s Western Desert Stakes

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