Scirocco agrees to sell EAG for £2.6m

(Sharecast News) - Scirocco Energy has conditionally agreed to sell its interest in Energy Acquisitions Group (EAG) for £2.6m, it announced on Thursday, plus up to £0.15m in contingent consideration, to OrbeNovo Capital. The AIM-traded firm said the transaction would transfer EAG's entire share capital to ONC Bidco 1.

It said the deal, signed on 19 December, would require shareholder approval and AIB's change of control consent, with a general meeting planned for January.

Scirocco said it would remain an investing company after the transaction.

The decision to divest EAG was based on capital constraints, uncertainty in contingent payments, and declining asset values due to global interest rate increases since 2022.

Proceeds were expected in early 2024, with a pro forma cash balance of £4m.

The company said it would retain an 8.39% interest in Kiliwani North, worth £0.16m as a contingent decommissioning liability.

Scirocco's board said it would explore options for delivering shareholder value, including cash distribution, further investments, or a reverse takeover transaction.

"I am pleased to announce a strategic decision regarding the proposed divestment of our interests in EAG," said chief executive officer Tom Reynolds.

"This move is grounded in a thorough evaluation of key factors influencing the growth and development of our investments.

"The combination of the challenges of retaining EAG without predictable access to capital, and considering the decline in Greenan's remaining life, the board is convinced that the opportunity to sell now on the terms described here provides the optimal window for divestment."

Reynolds said that while the consideration payable to the company fell short of the total investment made into EAG, the valuation of EAG mirrored the business's fair market value in its current form.

"The board will continue its review of the range of alternative opportunities and next steps for the company."

At 1323 GMT, shares in Scirocco Energy were flat at 0.28p.

Reporting by Josh White for Sharecast.com.