Edinburgh-based international oil and gas company Cairn Energy said on Monday it agreed to sell its Senegal interests to Russia’s LUKOIL for up to $400 million and intends to return at least $250 million to shareholders as a special dividend after the sale.
Cairn shares rose 7%.
In a stock exchange statement, Cairn said: “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.”
Cairn CEO Simon Thomson 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.”