AWE sells US shale assets for US$190 million cash

AWE Limited (ASX: AWE) has announced that it had entered into an agreement to sell its 10% working interest in the Sugarloaf Area of Mutual Interest (AMI) to Carrier Energy Partners II, LLC (CEP II), for cash consideration of US$190 million (AUS$271 million). CEP II is a Houston, Texas USA, based private oil and gas company, focused on the acquisition and exploitation of upstream assets. AWE has received a deposit of US$14 million (AUS$20 million) and the transaction is expected to be completed by the end of March 2016.

The sale proceeds of AUS$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 AUS$60 million at the anticipated closing date.

The sale agreement has an effective date of 1 January 2016 and is subject to purchase price adjustments at closing, including a payment to AWE of approximately US$9 million (AUS$13 million) for drilling costs incurred prior to the effective date. Tax on the transaction is estimated at US$35 million (AUS$ 50 million), payable in the June quarter. The sale is expected to generate a non-cash profit after tax of approximately AUS$16 million (unaudited), subject to purchase price adjustments. The current mark to market value of AWE’s unutilised oil price hedges relating to the Sugarloaf asset is US$5.2 million (AUS$7.5 million).

Mr 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.

An excellent outcome

“The sale of the Sugarloaf asset for AUS$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% Sugarloaf interest in 2010, having recognised the potential value of the acreage.

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/28012016/awe-sells-us-shale-assets-for-us190-million-cash-aus271-million/