UK-based Cairn Energy is offloading its assets off Norway after a pair of drilling disappointments, with buyer Solveig Gas set to boost its upstream position through the $100 million deal.

Solveig, backed by Norwegian private equity fund HitecVision, will get its hands on Cairn subsidiary Capricorn's key country asset, a 10% non-operated stake in Wintershall Dea’s Nova field development in the North Sea, as well as a number of exploration licences.

The sale by Cairn, set to be completed in early 2020 subject to regulatory and other customary approvals, follows an abortive drilling campaign by the subsidiary with its first two operated wildcats off Norway that came up dry at the Lynghaug and Godalen prospects in the Norwegian Sea.

Capricorn also has plans to drill two more exploration wells off Norway next year, including one at the Duncan prospect in its operated production licence 880 in the North Sea in which it holds a 60% stake that will be transferred to Solveig under the transaction.

Solveig said “the remaining portfolio of exploration licences is expected to trigger further activity”.

Cairn said it will have reduced its committed exploration and development expenditure by around $100 million with the deal, with proceeds to be used to fund its ongoing business.

"This is a further attractive transaction for Cairn shareholders in line with our consistent strategy to realise value and redeploy capital within our portfolio,” chief executive Simon Thomson said.

He added the company would still have a “material business” in the UK North Sea with its interests in the producing Kraken and Catcher fields.

The gross value of the assets being transferred is $207.4 million, with a net value of $80.1 million, according to Cairn, which said Capricorn made a $6.5 million loss for the first six months of this year.

Solveig, for its part, is significantly increasing its exposure to upstream assets off Norway after recently acquiring a 10% stake in Neptune Energy’s under-development Duva field to diversify beyond solely midstream interests in gas infrastructure assets.

Both Duva and Nova are being developed as separate subsea tie-backs to the Neptune-operated Gjoa platform.

Solveig’s chairman Gunnar Olsen said: “This transaction is in line with the strategy of Solveig becoming an integrated, infrastructure based E&P operating company, combining its gas pipeline assets with exploration, ongoing and future developments and resulting production.”

The acquisition of Capricorn is set to provide Solveig with production of about 6000 barrels of oil equivalent per day from Nova when the field starts up 2021 and also give it “the competence to act in the role as an operator for exploration licences in Norway”, the company stated.

Solveig will acquire substantial stakes held by Capricorn in a total of 17 production licences off Norway.

In addition, Solveig is one of the major owners in Norway’s gas infrastructure consortium Gassled with a 15.56% stake and recently acquired a 13.3% interest in the Polarled gas pipeline serving Equinor’s Aasta Hansteen field.

Finance

Cairn to sell its Norway assets to Solveig Gas