Shell Sells Its Egyptian Oil Business to Cairn in a Deal Worth up to $926 Million

By Mariliana Fotopoulou Tuesday, March 9, 2021

A Shell gas station at night.

Oil business giant Royal Dutch Shell has agreed to sell its projects in Egypt’s Western Desert to Cairn Energy in a deal worth up to $926 million.

Focusing on Offshore Assets

Cairn Energy, the British oil and gas exploration and development company, said it sold $460 million worth of assets in the UK North Sea. On the other hand, the gas and oil business is purchasing projects in Egypt’s Western Desert from Royal Dutch Shell.

The British-Dutch oil business company will receive $646 million with additional payments of up to $280 million available between 2021 and 2024, depending on the oil price and the results of further exploration.

Cairn’s decision to dump its North Sea assets comes after a number of rivals have abandoned the same region. On the other hand, its new acquisitions in Egypt will allow Shell to capitalize on an ongoing divestment program in order to focus on offshore assets.

“The deal will deliver value to Shell and to Egypt. It will enable Shell to concentrate on its offshore exploration and integrated value chain in Egypt, including seven new blocks in the Nile Delta, West Mediterranean and Red Sea,” said Wael Sawan, Shell’s Upstream Director.

Both deals involving Cairn are expected to close in the second half of this year.

Al Stanton, an analyst at RBC Capital Markets, said that “Cairn needed to rejuvenate its investment case, and this move does that. However, shareholders are faced with a steep learning curve,” and that Egyptian assets typically provide “limited oil-price leverage.”

The Egypt deal involves Shell’s interest in 13 onshore concessions as well as in Badr El-Din Petroleum Co. Cairn will retain some of its exploration projects in the North Sea, including its collaborative Nelson project with Shell.

In separate news, Cairn said it produced 21,350 barrels of oil equivalent per day for 2020, which is lower than 23,739 barrels of oil equivalent per day reported for 2019. The company’s sales volumes last year were also down at 20,993 barrels of oil equivalent per day compared to 21,412 barrels of oil equivalent per day in 2019.

According to the company’s earnings report, the average price per barrel in 2020 was $42.56, compared to $65.70 recorded in 2019. The company said average production costs per barrel of oil equivalent rose to $19.73 from $17.38 in 2019.

The business production revenue stood at $324.5 million for 2020, down from $504.2 million a year before. The company also reported a net cash inflow from operating activities of $257.9 million compared to $406.5 million in 2019.

Summary

The British company Cairn has agreed to pay up to $926 million to buy projects in the Western Desert from the Anglo-Dutch oil business titan Royal Dutch Shell.

About the Author


Headshot for author Mariliana Fotopoulou

Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.

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