Edinburgh-based oil and gas explorer Cairn Energy today said it is to buy Norwegian exploration Agora Oil & Gas for about £280million.
Cairn said the deal, which would see it take on interests in licences in the UK and off Norway, including the Catcher area, would help bring “balance” to the firm’s portfolio.
Cairn’s recent focus has been exploration off Greenland, a high-risk frontier area, and more recently in the Mediterranean.
Buying Agora, which has 15 staff in the UK and Norway, would see it take on less risky exploration and future production assets, said chief executive Simon Thomson.
He said: “This is an important first step in establishing balance in the Cairn portfolio.
“This acquisition secures a building block in areas where we see the opportunity to build cash flow from near term, lower risk exploration, development or producing properties.
“Agora possesses attractive core assets and significant exploration potential both in 2012 and beyond in an area offering future organic growth.”
Last month Cairn Energy revealed losses of more than £750million during 2011, following an unsuccessful drilling campaign off Greenland.
However, it said it still saw multibillion-barrel potential for oil in Baffin Bay in the Arctic region.
The deal announced today would see Agora become a wholly-owned subsidiary of Cairn.
Agora has exploration assets off Norway and the UK – including interests in nine wells due to be drilled this year in the UK North Sea and Norwegian North Sea.
It also has a 15% stake in the significant Premier Oil operated Catcher area and 20% in the Tybalt discovery.
In total, the deal would bring Cairn about 22million barrels equivalent of contingent resources, mostly oil, and prospective unrisked resources of about 49million barrels through 10-30% non-operated stakes across 11 licences, Cairn said.
It said, subject to the deal being approved, Cairn would give cash and shares for the firm, at 43% and 57% overall respectively, with the Agora team getting 90% shares for their 16% holding in the business.
The rest would go to the firm’s owners RIT Capital Partners and Lord Rothschild’s family interests.
RIT said it would make a profit of £73million on the deal, netting £114million from its investment of £41million in Agora.
Enterprising connections:
Agora was set up in October 2009 backed by RIT Capital Partners and Lord Rothschild’s family interests, who pledged to fund up to £125million of North Sea drilling.
The core team at Agora were the same group that set up another exploration firm, Revus Energy, which grew in value from £106million in 2005 to £468million in 2008, when it was bought by Wintershall.
Its focus had been on finding oil and gas in mature areas that had already been highly explored.
Many of the team at Revus in turn came out of Enterprise Oil – formed out of one of Margaret Thatcher’s first forays into privatisation in 1983 and sold to Shell in 2002.
Agora chairman Andrew Armour joined Enterprise and became exploration director after working at Shell and then Superior Oil.
Chief executive of Agora Tim Sullivan was also previously at Enterprise Oil, as exploration manager and then general manager Norway. He was a co-founder of Revus Energy.
Callum Smyth, Agora HSE and operational manager, was a well engineer at Enterprise and then also worked at Revus.
Agora exploration manager Chris Elliott was also part of the team at Revus Energy.