EnCore sells interest in Breagh gas discovery
Posted: 23 July 2009
EnCore Oil plc has signed Sale and Purchase Agreements with RWE Dea UK SNS Limited for the sale of its 15 per cent interest in the Breagh gas discovery on Block 42/13 and surrounding acreage in the UK Southern North Sea.
RWE Dea will pay total cash consideration to EnCore of US$68.8 million, with the deal expected to complete in approximately 4 to 6 weeks.
There is not expected to be any tax payable by EnCore on the sale. All Breagh co-venturers have sold their interests to the same buyer, other than Sterling Resources which has elected to retain a 30 per cent non-operated interest from its original 45 per cent share. EnCore and its co-venturers were advised on the transaction by Standard Chartered.
"It is close to three years since EnCore acquired its interest in Block 42/13, and the company, together with its partners, has drilled three wells to appraise the 1997 discovery in a technically complex structure," said Alan Booth, EnCore's Chief Executive Officer.
"We are very pleased to have proved up a significant gas discovery, and in line with our strategy we have now disposed of Breagh at a time in its lifecycle before it requires further significant capital injections, as it progresses to its development phase. We are pleased that in RWE Dea, the Breagh discovery will now be taken forward by a proven operator with the capital and technical resources to fully exploit the field.
"EnCore will continue to rationalise its portfolio of assets and seek to create value for our shareholders, particularly through those parts of the portfolio we feel are not fully recognised.
"We do not expect to commit to further exploration drilling activity in the near term other than on Catcher and Cladhan which we expect to be drilled in 2010. In the meantime we will seek to progress our gas storage, Irish and onshore portfolios, whilst maintaining capital flexibility."
On completion of the deal, and receipt of the sale proceeds, approximately 20 per cent of the consideration (US$13 million to EnCore) will be placed in an interest bearing escrow account for 12 months as security against any potential warranty or indemnity claims by the purchaser.
The Board will meet shortly to consider a full range of options for the application of the sale proceeds in line with its previously stated strategy of returning value to shareholders.
The options to be considered will include seeking shareholder approval for a share buyback and/or a capital restructuring scheme and also the potential for opportunistic investment in strategic assets.
Posted by Richard Price, Editor, EnergyME.com
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