Cairn Energy PLC announces acquisition of Agora Oil & Gas AS
Cairn is pleased to announce the acquisition of Agora Oil & Gas AS (Agora) subject to regulatory approval, a private Norwegian company with non-operated, exploration, appraisal and development assets in the United Kingdom (UK) and Norwegian North Sea.
The enterprise value of the proposed acquisition of Agora as at 1 January 2012 was $375 million (m), including $58m of potential tax shelter in the UK and Norway. The business held net working capital of $75m, giving a total consideration of $450m to be satisfied through a combination of approximately 43% cash and 57% Cairn shares. The Agora team holds 16% equity and will receive approximately 90% of their consideration in Cairn shares. Agora is currently owned by RIT Capital Partners PLC and Lord Rothschild's family interests, along with management. The transaction is subject to consent from the relevant regulatory authorities in the UK and Norway.
Agora will add drilling activity to Cairn's 2012 exploration and appraisal programme, with nine wells, eight firm and one contingent, scheduled to be drilled in the UK and Norway in 2012. The proposed acquisition includes Agora's 15% stake in the Catcher area planned for development and a 20% interest in the Tybalt discovery, which both have further drilling programmes planned this year. We estimate that Agora has 22 mmboe in 2C contingent resources (95% oil) and a growing prospective resource currently estimated at 49 mmboe (net Pmean risked) and 213 mmboe (net Pmean unrisked), held through 10-30% non-operated interests in 11 licences. Three wells are currently operating: two exploration wells (Skarfjell and Cladhan South); and one appraisal well (Tybalt).
The transaction is an important step forward in Cairn's stated goal of expanding the portfolio by adding lower risk, near term exploration, appraisal and development assets to complement transformational frontier exploration in Greenland and the Mediterranean, resulting in a more balanced overall business.
The Agora team that will join Cairn has a proven ability to create and realise value through exploration, appraisal and development. Previously, the same team built Revus Energy ASA from an initial value of US$170m in 2005 to its $750m sale value in 2008. Their experience in creatively identifying new play concepts and prospects in a relatively mature basin will be a significant asset and highly complementary to the Cairn team.
Simon Thomson, Chief Executive of Cairn Energy PLC said:
"This is an important first step in establishing balance in the Cairn portfolio. This acquisition secures a building block in areas where we see the opportunity to build cash flow from near term, lower risk exploration, development or producing properties.
Agora possesses attractive core assets and significant exploration potential both in 2012 and beyond in an area offering future organic growth. Like the Cairn team, the Agora team have a proven track record of adding and realising value for shareholders.
The addition of these assets will aid the Company's vision to create significant value within a well balanced portfolio of exploration and production assets."
Svein Ilebekk, Chief Executive of Agora Oil & Gas said:
"Our team is delighted to become part of a leading industry exploration company. Cairn is a strongly funded business, providing financial flexibility for our next phase of growth. We have a shared mindset and, together, we have the capacity to expand our exploration efforts and to realise the full potential of the business. Cairn's extensive offshore and operating experience will combine very well with our technical subsurface and commercial skills in the region."
Agora Contingent Resources
Licence P1430 Catcher Area (15% WI), Central North Sea
Exploration, appraisal and development in Blocks 28/9a and 28/10c, operated by Premier Oil, comprising the Catcher, Burgman and Varadero discoveries and the Carnaby, Bonneville, Paso, Rocket and Cougar exploration prospects. The discoveries lie approximately 25 kilometres (km) south of Bittern and 30km west of Curlew in the Central North Sea.
Licence P1632 Tybalt (20%), Northern North Sea
Appraisal and possible development of the Valiant Exploration operated Tybalt discovery in the Northern North Sea (water depth 305m). The discovery lies 170km north east of the Shetland Islands, 8km east of the Magnus field and 10km North West of the Penguins fields.
Agora holds interests in nine other licences including two recently awarded licences in APA 2011 licensing round in the Norwegian North Sea (with Statoil as operator). Agora also intend participating in the forthcoming UK 27th Licensing Round.
The 2012 exploration programme includes eight firm wells and one contingent well: six UK wells across five different licences (Catcher area, Bardolph, Cladhan South, Tybalt and Timon); and three Norwegian prospects (Skarfjell, Kakelborg and Frode).
Agora is party to a Non-exclusive Area of Mutual Interest (AMI) with Statoil covering Tampen, Fram and Sleipner areas of Norwegian Continental Shelf and central and northern North Sea areas of UK Continental Shelf.
The following wells are currently operating:
Skarfjell - Norway Licence PL418, Operator Wintershall (35%), Agora (20%), Bayerngas Norge (20%), Edison International Norway Branch (15%), RWE Dea Norge (10%)
Cladhan South - UK Licence P1680, Operator Sterling Resources (25%), Valiant Exploration (30%), Wintershall (25%), Agora (20%).
Upon completion, Agora will be a wholly owned Cairn subsidiary.
Rothschild acted as financial adviser to Cairn on this transaction.
Simon Thomson, Chief Executive
Jann Brown, Managing Director & CFO
Mike Watts, Deputy Chief Executive
David Nisbet, Corporate Affairs
Tel: 0131 475 3000
Patrick Handley, David Litterick
Brunswick Group LLP
Tel: 0207 404 5959
There will be an analyst conference call at 0900 BST.
Presentation slides will be available on the Cairn Energy PLC website from 0700 BST.
UK Free Call 0800 073 1807
Standard International +44 (0) 1452 541 076
Conference ID 67623641
A recording of the conference call will be available by 1600 BST, Tuesday 3 April 2012 until Friday 13 April 2012 by dialling 0800 953 1533 free from the UK or +44 (0) 1452 55 00 00 internationally and using the access number: 67623641#
A transcript of the conference call will be available on the website as soon as possible after the event.
NOTES TO EDITORS
Agora Oil & Gas
Ø Formed in October 2009 by the former management team of Revus Energy ASA and based in Stavanger, Norway. Agora has focused on creating exploration and appraisal value in mature parts of the North Sea in areas of low-moderate geological and operational risk.
Ø Agora Gross Assets were NOK 717,941,000 which at 31 December equated to $120,101,208. The Group had no profits for the year. Loss for the year was NOK 50,347,000 or $8,978,700.
Ø Agora's Board of Directors is led by Chairman Andrew Armour and Chief Executive Svein Ilebekk. The senior management team includes Tim Sullivan (Deputy CEO and UK Manager), Chris Elliott (Exploration Manager), Erik Samuelsen (Commercial Manager), Ingrid Landråk (Chief Financial Officer) and Callum Smyth (HSE & Operational Manager).
Ø Agora has 15 employees who are based in Stavanger and the UK.
Cairn Energy PLC
Ø Cairn Energy PLC ("Cairn") is an Edinburgh-based oil and gas exploration and production company listed on the London Stock Exchange.
Ø "Cairn" where referred to in this release means Cairn Energy PLC and/or its subsidiaries as appropriate.
Ø Cairn currently holds approximately 22% of the issued share capital of Cairn India Limited (CIL). Production from CIL's Rajasthan operations is expected to reach the approved plateau of 175,000 bopd in 2012.
Ø Cairn Energy PLC (including Capricorn) is run from Edinburgh with operational offices in Kathmandu, Nuuk and Madrid.
Cairn in Greenland
Ø Cairn through its subsidiary, Capricorn, operates 11 blocks offshore Greenland.
Ø Cairn carried out extensive Environmental and Social Impact Assessments to identify how potential environmental and social impacts of its drilling programme can be avoided or mitigated.
Ø A total of 14 exploration wells have been drilled offshore Greenland to date, five of which were drilled in the 1970s, one in 2000, three in 2010 by Cairn Energy and five by Cairn Energy in 2011.
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