UK-listed Energean Oil and Gas has agreed to buy the upstream business of Italy's Edison in a bid to expand its operations in the Mediterranean, Energean said Thursday.
The purchase price of the acquisition -- expected to close in Q4 2019 -- is $750 million, with a further $100 million payable following first gas from Edison E&P's Cassiopea development offshore Italy in 2022, Energean said.
In a separate statement, Edison said it would get royalties associated with further potential developments in Egypt that would bring the aggregate value of the deal close to $1 billion.
"The acquisition of Edison E&P establishes Energean as the leading independent, gas focused E&P company in the Mediterranean," Energean CEO Mathios Rigas said in a statement.
Energean, which currently has upstream assets in Israel, Greece and Montenegro, said the purchase would add reserves of 292 million boe and production of some 69,000 b/d of oil equivalent.
The enlarged entity will have 639 million boe in reserves and is targeting production of more than 140,000 boe/d by 2021, when Energean's key Karish and Tanin gas development projects in Israel come on stream.
It plans a further production of some 200,000 boe/d in future as the Israeli fields ramp up.
Edison E&P has producing assets in Egypt, Italy, Algeria, the UK North Sea and Croatia, as well as development assets in Egypt, Italy and Norway.
'GAS-WEIGHTED' PORTFOLIO
Following the deal, Energean would have a "mainly operated, low-cost, gas-weighted portfolio," Rigas said.
"It will diversify Energean into a multi-country, multi-asset, full-cycle E&P company with scale, material cash flows, significant growth and portfolio optionality," he added.
Rigas said Energean would also retain "as a key priority" the startup of the Karish and Tanin gas fields in Israel in Q1 2021.
Energean said the majority of its and Edison E&P's gas is sold under fixed priced gas contracts. This, Energean said, provides "stability and predictability to cash flow, helping mitigate impact of oil price volatility."
Gas makes up 76% of Edison E&P's reserves and 80% of its 2018 production, the company said. For Edison, the rationale for the sale is to focus more on its core Italian business, it added.
"The financial resources deriving from this transaction will support Edison's strategic development plan, which envisages very significant investments in Italy in the 2019-2021 three-year period intended mainly for sustainable production from renewable sources and gas, as well as the strengthening of the company's activities in retail market and energy efficiency services," Edison said.
