After marketing its Eagle Ford assets since November, AWE Ltd. said it has found a buyer for its 10% working interest in the Sugarloaf area of mutual interest (AMI).

Private Houston-based Carrier Energy Partners II has agreed to purchase the interest in Karnes County, Texas, for US$190 million.

AWE received a deposit of $14 million. The transaction is expected to be completed by the end of March.

The sale comes just months after Australia’s AWE said its Sugarloaf 1P and 2P reserves increased in July. Proved reserves alone jumped by 48% to 19.4 million barrels of oil equivalent (MMboe).

In fiscal year 2014-15, Sugarloaf production increased 54%, the company said in November.

Marketing materials said in November that AWE was offering interests in 2,400 net acres operated by Marathon Oil Corp. (NYSE: MRO) in the condensate window of the Eagle Ford.

AWE had about 260 gross proved developed producing wells generating 4,500 boe/d, 71% liquids. About 1,500 gross potential locations were remaining.

The sale proceeds will be used to repay debt drawn under the AWE’s debt facility and will “substantially strengthen the company’s balance sheet,” leaving the company in a net cash position of US$42.2 million (AU$60 million) at the anticipated closing date.

The agreement has an effective date of Jan. 1, and is subject to purchase price adjustments at closing, including a payment to AWE of about US$9 million (AU$13 million) for drilling costs incurred prior to the effective date.

Tax on the transaction is estimated at US$35 million (AU$50 million), payable in the June quarter.

The sale is expected to generate a non-cash profit after tax of about AU$16 million (unaudited), subject to purchase price adjustments.

The current mark to market value of AWE’s unutilized oil price hedges relating to the Sugarloaf asset is US$5.2 million (AU$7.5 million).

The sale is consistent with the company’s strategy of divesting assets to recycle capital into ground floor developments, such as the Waitsia gas project in Western Australia, said Bruce Clement, AWE’s managing director and CEO.

“The sale of the Sugarloaf asset for AU$271 million is an excellent outcome for AWE and demonstrates the company’s proactive approach to portfolio management and its ability to consistently deliver significant value, even in a low oil price environment,” he said.

In July, Clement said that Sugarloaf had consistently delivered “excellent production and significant upgrades to AWE’s reserves and resources throughout its development.”

“Sugarloaf has been a valuable growth project for AWE because it is located in the sweet spot for condensate production from the Eagle Ford Shale formation in Texas,” he said. “We acquired full control of the 10% Sugarloaf interest in 2010, having recognized the potential value of the acreage.”

The Waitsia Field may be biggest onshore conventional gas discovery in Australia in the past 30 years, AWE said.

The sale of the Sugarloaf asset will reduce AWE’s production, sales revenue and development spending guidance for the 2015-16 financial year. The company will restate guidance at its half year results in February.

AWE was advised on the transaction by UBS Investment Bank.

Darren Barbee can be reached at dbarbee@hartenergy.com.

Comments