AWE Limited revealed Wednesday that it had entered into an agreement to sell its 10 percent working interest in the Sugarloaf Area of Mutual Interest (AMI) project in the Eagle Ford Shale, Texas to Carrier Energy Partners II, LLC (CEP II), for cash consideration of $190 million (AUD 271 million). CEP II is a Houston, Texas, U.S.-based private oil and gas company, focused on the acquisition and exploitation of upstream assets. AWE has received a deposit of $14 million (AUD 20 million) and the transaction is expected to be completed by the end of March.
The sale proceeds of AUD 271 million will be used to repay debt drawn under the Company’s debt facility and will substantially strengthen the Company’s balance sheet, leaving AWE in a net cash position of approximately AUD 60 million at the anticipated closing date.
The sale agreement has an effective date of Jan. 1 and is subject to purchase price adjustments at closing, including a payment to AWE of approximately $9 million (AUD 13 million) for drilling costs incurred prior to the effective date. Tax on the transaction is estimated at $35 million (AUD 50 million), payable in the June quarter. The sale is expected to generate a non-cash profit after tax of approximately AUD 16 million (unaudited), subject to purchase price adjustments. The current mark to market value of AWE’s unutilized oil price hedges relating to the Sugarloaf asset is $5.2 million (AUD 7.5 million).
Bruce Clement, AWE’s managing director and CEO, said that the sale of Sugarloaf was consistent with the Company’s strategy of divesting assets in order to recycle capital into ground floor developments, such as the Waitsia gas project in Western Australia.
“The sale of the Sugarloaf asset for AUD 271 million is an excellent outcome for AWE and demonstrates the Company’s proactive approach to portfolio management and its ability to consistently deliver significant value, even in a low oil price environment,” he said.
“Sugarloaf has been a valuable growth project for AWE because it is located in the sweet spot for condensate production from the Eagle Ford Shale formation in Texas. We acquired full control of the 10 percent Sugarloaf interest in 2010, having recognized the potential value of the acreage.
“AWE has worked with the operator, Marathon Oil, over the past few years to optimally develop the asset and realize its potential. With Sugarloaf now entering a more mature phase of production and development, the time is right to divest this asset and focus on the next major project for AWE - the Waitsia gas project in Western Australia,” Clement said.
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