Waldorf Production UK has entered into an agreement with Capricorn Energy for the full and final settlement of the earn-out consideration related to the acquisition of the Catcher and Kraken fields from Capricorn in 2021.
Aaditya Chintalapati, Chief Financial Officer, commented:
'The Capricorn Settlement represents a significant milestone for Waldorf. Through the agreement, we have improved our liquidity position by around USD 50 million. This, together with the MOL deferral, will enable us to comfortably meet our near-term liquidity requirements, stay in compliance with bond covenants and strengthen our ability to pursue acquisition of further UK production where we continue to benefit from our substantial tax losses. The Capricorn Settlement is expected to result in significantly higher operating cash flow during 2024-25 whilst also providing us with increased exposure to both higher oil prices and any additional production from the Catcher and Kraken fields.'
The Capricorn Settlement
As part of the acquisition of the Catcher and Kraken fields from Capricorn in 2021, Capricorn is entitled to an uncapped contingent consideration dependent on oil prices and production performance from the Catcher and Kraken fields from 2021 to the end of 2025 with WPUK effectively paying any taxes related to the contingent consideration (the 'Capricorn Earn-out'). Based on realized oil prices and production from the Catcher and Kraken fields year to date and expected oil prices and production from the Catcher and Kraken fields for the rest of the year 2023, WPUK estimates the Capricorn Earn-out payment for 2023 payable in March 2024 to be around USD 50 million with further payments expected for years 2024 and 2025.
Under the Capricorn Settlement, WPUK has agreed a full and final settlement of the Capricorn Earn-out, whereby Capricorn has waived any future claims against WPUK related to the Capricorn Earn-out in return for the following consideration to be provided by WPUK:
- USD 48 million to be paid immediately. This is funded using the USD 48 million restricted cash provided to Capricorn as security for Kraken FPSO charter payments (the “USD 48 million Restricted Cash Release”). Following the release of the USD 48 million of restricted cash, there will be no further requirement for WPUK to maintain cash collateral and/or alternative collateral instruments related to the Kraken FPSO charter payments.
- USD 2 million in cash to be paid on 1 April 2024.
- USD 22.5 million in cash to be paid on 3 January 2025.
- Transfer of WPUK’s 25% working interest in the Columbus field with an effective date of 1 January 2024 (the “Columbus Divestment”).
Through the USD 48 million Restricted Cash Release and the Columbus Divestment, WPUK is able to fund the majority of the Capricorn Settlement without using any of WPUK’s unrestricted cash, with the balance of the Capricorn Settlement to be financed through its 2024 cash flow. Furthermore, the Capricorn Settlement provides WPUK with increased exposure to both higher oil prices and any additional production from the Catcher and Kraken fields during 2024-25.
If the Columbus Divestment does not complete within nine months, WPUK shall pay Capricorn USD 7 million in cash instead of transferring its interest in Columbus. Considering the net proceeds from WPUK’s divestments are below the threshold of USD 10 million, the Columbus Divestment will not trigger any redemption of WPUK’s outstanding bonds. Similarly, no put option will be triggered under the bonds issued by Waldorf Energy Finance Plc.
The MOL Deferral
Waldorf Production Limited has also entered into an agreement with MNS Oil & Gas B.V., a wholly owned subsidiary of MOL Plc., for the deferral of payments due in December 2023 and February 2024 related to the acquisition of MOL’s UK business in 2022. The terms of the agreement are confidential.
This information is considered to be inside information pursuant to the EU Market Abuse Regulation and is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. This stock exchange announcement was published by Aaditya Chintalapati, CFO on the date and the time referred to above.
Source: Waldorf Production
