AWE Ltd. has entered into an agreement to sell its 10% working interest in the Sugarloaf Area of Mutual Interest (AMI) project in the Eagle Ford shale play in Texas to Carrier Energy Partners II LLC (CEP II), for cash consideration of $190 million (AUD 271 million).
CEP II is a Houston, Texas-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 AWE’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).
AWE was advised on this transaction by UBS Investment Bank.