Cairn Energy (LON: CNE) to Complete Sale of Senegal Assets by Year End, Repay Shareholders $250 Million

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Cairn Energy (LON: CNE) to Complete Sale of Senegal Assets by Year End, Repay Shareholders $250 Million

 Cairn Energy (LON: CNE) to Complete Sale of Senegal Assets by Year End, Repay Shareholders $250 Million

Summary

  • Cairn Energy has announced that it will complete the sale of its Senegal offshore assets by the end of this year for nearly $525.0 million in cash, with a further payment possibility of $100 million if certain conditions are met.
  • Out of the sale proceed, the company will pay back shareholders an amount of $250 million in a special dividend of 32.0 pence per ordinary share on 25 January 2021.
  • Following the pandemic-led disruption and fall in crude oil prices, the company had conducted a strategic review of its business and decided to sell its Senegal assets.

Hard hit by the coronavirus pandemic, Oil & Gas exploration major Cairn Energy plc has announced that it will be completing the sale of its oil and gas asset off the coast of Senegal by the end of this year. The sale proceeds which will be nearly $525 million, will be utilised to pay back shareholders an amount of $250 million, as a special dividend of 32.0 pence per ordinary share to be paid on 25 January 2021. The rest will be retained by the company for its capital expenditure as well as working capital requirements. 

As per the deal, Cairn’s $525.0 million in cash would comprise of $300.0 million from the sale and the remaining $225.0 million to compensate it for outgoings related to the assets since 1 January. Also, there is a provision of an additional payment of up to $100.0 million if certain conditions are met relating to the date of the first production from the Sangomar development and the oil price prevailing that time.

The sale transaction

Cairn Energy is selling its assets to Australian firm Woodside Energy who have been the company’s joint venture partners in the project. This asset sale will strengthen the company’s balance sheet, reduce its capital commitments for the forthcoming years and ensure adequate availability of funds for smooth unhindered funding for its existing development assets. 

Crude oil market in 2020

After the outbreak of COVID- 19, the crude oil markets took a major hit. As most of the transportation systems in the world continue to operate at much reduced capacities, the consumption of petroleum products is much lower than what they were a year earlier. Several companies over the past few months have cut down on their existing production and even abandoned ongoing development projects because of this slump. Cairn Energy plc was also equally impacted and decided to reorganise its strategic plans to adapt to the emerging new situation.

The share price performance of Cairn Energy plc

(Source- Refinitiv, Thomson Reuters)

The shares of Cairn Energy Plc (LON: CNE) started the day on a subdued note, trading at GBX 169.20 per share as on 18 December 2020, 8.02 AM GMT+1, lower by 1.63 per cent over the previous day’s close.

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