AWE sells US shale assets for $AUD271 million

The Waitsia gas project in Western Australia.

The Waitsia gas project in Western Australia.

Mid-cap explorer AWE Limited is set to sell its US shale assets in order to tip additional capital into its Waitsia gas project in Western Australia.

The company announced that it had entered into an agreement to sell its 10 per cent working interest in the Sugarloaf Area of Mutual Interest to Carrier Energy Partners II, LLC for a cash consideration of $AUD 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 $AUD 20 million and the transaction is expected to be completed by the end of March 2016.

The sale proceeds of $AUD 271 million will be used to repay debt drawn under the company’s debt facility and will 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 1 January 2016 and is subject to purchase price adjustments at closing, including a payment to AWE of approximately $AUD 13 million for drilling costs incurred prior to the effective date.

AWE Managing Director and CEO Bruce Clement 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.

Earlier this month, AWE announced that it had achieved FID for the first stage of development for the significant Waitsia gas project. Production from Waitsia will provide early cash flow from mid-2016 as well as valuable data that will help AWE optimise plans for full field development.

“Post the sale of Sugarloaf, AWE will continue to focus on maintaining a balanced and diverse portfolio with a range of gas assets such as Waitsia, BassGas and Casino weighted to near term production, and other undeveloped assets such as the Ande Ande Lumut oil project weighted towards the medium to long term with potential for future upside in oil prices,” Mr Clement added.

The sale of the Sugarloaf asset will reduce AWE’s production, sales revenue and development expenditure guidance for the 2015-16 financial year. The company will restate guidance at its half year results on 24 February 2016.

AWE was advised on this transaction by UBS Investment Bank.

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