Cairn Energy Signals Possible Sale of Senegal Oil-Field Stake

DAKAR (Capital Markets in Africa) – Cairn Energy Plc signalled it may sell a stake in a Senegalese oil field, cashing in on one of the largest recent discoveries off West Africa.

Once the project development plan is approved this year and an investment decision made, Cairn will have “options in respect to potential farm-downs,” Chief Executive Officer Simon Thomson said Tuesday. Selling an interest in the field — called SNE — would allow the U.K. exploration company to profit from the find before moving to production, returning proceeds to shareholders.

“Once the exploitation plan is finalized, it could open up the opportunity to monetize the discovery,” Nathan Piper, an analyst at RBC Europe Ltd., wrote in a note. It’s likely Cairn will sell half its stake in SNE in the next 12 to 18 months, he said.

Senegal has become an industry hot spot, attracting the likes of BP Plc following the discovery of fields including SNE, the largest offshore oil find of 2014. Cairn, which has 40 percent of the deposit, expects its development plan to be approved by Senegal toward year-end. A final investment decision would follow soon after, paving the way for initial output of 100,000 barrels a day.

Open Question
“We’ve ensured that we have the financial capability to take this development right the way through — at our current equity interest — to first oil,” Thomson said on a conference call. “Post-FID, there’s a higher degree of certainty from an industry perspective and that gives you options,” he said, adding that a farm-down “remains an open question.”

The other SNE partners are Australia’s Woodside Petroleum Ltd., which has a 35 percent stake, Far Ltd. with 15 percent and national oil company Petrosen with 10 percent. Woodside is set to take over operatorship once the government approves the development.

A production rate of about 100,000 barrels a day would bring SNE on a par with Tullow Oil Plc’s Jubilee field, which pumped an average 102,600 barrels a day in 2015 before suffering technical problems. Cairn said it expects first oil sometime between 2021 and 2023.

Source: Bloomberg Business News