Join our community of smart investors

Cairn finds $400m buyer for Sangomar stake

Special dividend worth $250m for shareholders on deal completion with Lukoil
July 27, 2020

Cairn Energy (CNE) was in a privileged position in March compared to fellow oil and gas producers. Its debt was low and the only question was the $600m (£467m) or so needed to fund its share of the development of the Sangomar offshore project in Senegal, which it discovered in 2014. 

IC TIP: Hold at 133p

Now the group has answered that question by finding a buyer for its 40 per cent stake for up to $400m, plus capital spending between January and the completion date. It will hand shareholders $250m as a special dividend. 

Major Russian producer Lukoil (Rus:LKOH) is the suitor. The expected spending on Sangomar was forecast at $330m this year, cut from $400m because of the oil price crash. The offshore project is expected to produce 100,000 barrels of oil per day (bopd) overall, with production forecast for 2023. 

Cairn’s share price was up 7 per cent on the news, to 133p. It started the year trading around 200p. 

Payment for the deal, if successfully completed, will be $300m upfront and then up to $100m - depending on when project operator Woodside Energy brings Sangomar to production, and the oil price at the time. 

Approvals are needed from shareholders, Woodside and the government of Senegal. Cairn said it was aiming for completion by the end of the year.