UK-based Energean Oil and Gas has agreed to acquire Edison Exploration & Production (Edison E&P), the oil and gas business of Italian energy company Edison, for up to $850m (£675m).

Edison E&P handles all the activities, mining titles and corporate shareholdings in the hydrocarbons business of Edison in Italy and other countries.

Edison E&P Portfolio

The company’s portfolio includes nearly 90 licences in nine countries in the Mediterranean and Northern Europe. Included in this, are producing assets in Egypt, Italy, the UK North Sea, Algeria, and Croatia, along with development assets in Egypt, Italy and Norway.

Through the acquisition, Energean will be adding 292mmboe in working interest 2P reserves and 2018 net working interest production of 69kboe/d.

Why Energean is acquiring Edison E&P

The transaction is said to be in line with Energean’s strategy of becoming a top independent, gas-focused E&P company in the Mediterranean. Furthermore, it will increase the company’s scale and diversification by a significant extent through the addition of a complementary portfolio of accretive development, appraisal and exploration opportunities.

Post-acquisition, the enlarged company is likely to have production in excess of 140kboe/d in 2021, following the commissioning of Energean’s Karish and Tanin development project, with a trajectory to reach nearly 200kboe/d after the Energean Power FPSO reaches full capacity.

Energean chief executive Mathios Rigas said: “Edison E&P brings with it an exceptional team and I look forward to working with them as we build on the multiple opportunities ahead of us.”

“Together, our priority is to maximise the economic value of the combined portfolio, whilst retaining as a key priority delivery of Karish and Tanin First Gas into Israel in Q1 2021. Since 2007, Energean has delivered significant growth and value for our investors and this acquisition is the next important step on this growth and value journey.”

According to the conditional sale and purchase agreement signed by the parties, the transaction price includes an initial consideration of $750m (£596.1m) based on the enterprise value of Edison E&P and $100m (£79.48m) contingent consideration.

The contingent payment will be made based on bringing the offshore Cassiopea development gas project in Italy into production, which is expected to occur in 2022. Apart from that, Edison will be entitled to receive royalties pertaining to further potential developments in Egypt, to take the total value of the transaction close to $1bn (£794.8m).

The transaction also covers the transferring of all future decommissioning obligations of Edison to Energean.

Edison, in a statement, said: “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.”

Subject to receipt of required anti-trust and regulatory approvals and shareholders’ approvals, the acquisition is likely to be wrapped up in the fourth quarter 2019.