Australia-based AWE said Wednesday it has agreed to sell its 10 percent working interest in the Sugarloaf Area of Mutual Interest to Carrier Energy Partners II for $190 million in cash.
AWE has received a $14 million deposit from Houston-based CEP II, a private oil and gas company focused on the acquisition and exploitation of upstream assets.
The Sugarloaf AMI comprises 24,000 acres in the Eagle Ford shale play and holds proved plus probable reserves of 47.8 million barrels of oil equivalent, according to AWE.
The transaction is expected to be completed by the end of March 2016.
AWE said it will use the sale proceeds to repay debt drawn under the company’s debt facility.
The proceeds are expected to “substantially strengthen the company’s balance sheet” leaving AWE in a net cash position of about $42 million, or AUD 60 million, at the anticipated closing date.
The sale agreement has an effective date of January 1, 2016 and is subject to purchase price adjustments at closing, including a $9 million payment to AWE for drilling costs incurred prior to the effective date.
The sale is expected to generate an unaudited, after-tax non-cash profit of $11.27 million, subject to purchase price adjustments.
The current mark to market value of AWE’s unutilised oil price hedges relating to the Sugarloaf asset is $5.2 million.
AWE acquired its 10 percent stake in Sugarloaf in 2010.
AWE’s managing director and CEO Bruce Clement said that the sale of the Sugarloaf stake is 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.
“AWE has worked with the operator, Marathon Oil, over the past few years to optimally develop the asset and realise its potential. With Sugarloaf now entering a more mature phase of production and development, the time is right to divest this asset and focus on the next major project for AWE – the Waitsia gas project in Western Australia,” Clement said.
The sale of the Sugarloaf stake is expected to reduce AWE’s production, sales revenue and development expenditure guidance for the 2015 to 2016 financial year.
The company said it will restate its guidance in its half year results on February 24.