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Cairn Energy to Acquire Agora Oil & Gas

Source: www.gulfoilandgas.com 4/3/2012, Location: Europe

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.

Exploration Portfolio

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%)

Tybalt - UK Licence P1632, Operator Valiant Exploration (80%), Agora (20%)

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.

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Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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