Cairn Energy has agreed to divest its interests in the Catcher and Kraken fields located in the UK North Sea to Waldorf Production for $460m.

Located in the East Shetland basin, about 125km east of the Shetland Islands, the Kraken field is a large heavy oil accumulation.

The Catcher Area Fields comprise the Catcher, Varadero and Burgman fields.

Under the deal, Waldorf Production will acquire the UK-based oil and gas exploration and development company’s non-operated 29.5% interest in Kraken field and 20% stake in the Catcher field.

The deal is a part of Cairn’s strategy to further strengthen its balance sheet and provide flexibility to sustain producing assets.

Cairn CEO Simon Thomson said: “The divestment of our UK producing assets as they move into decline phase, will further strengthen our ability to pursue Cairn’s strategic goals and position the company robustly for the decade ahead.”

The transaction includes additional contingent consideration, which is dependent mainly on oil prices from 2021 to the end of 2025, Cairn said.

Waldorf Production CEO Erik Brodahl said: “This is a transformational transaction for the company, with average production from the combined company growing to 22,000 to 25,000 barrels of oil equivalent per day and 2P reserves of 43 million barrels of oil equivalent.”

Additionally, Waldorf has signed a deal with Ithaca Oil and Gas to acquire a 20% interest in Block 22/1b and a 15% interest in Block 22/1a.

The transaction is subject to contract and board approval.

Brodahl added: “We also continue our close partnership with Ithaca with the announced farm-in to the Fotla exploration well. If successful, the discovery can potentially be swiftly tied-back to the Alba oil field.

“Waldorf sees the North Sea as uniquely suited for disciplined small-cap E&P companies such as ourselves with well-managed, long-life assets available at attractive valuations.”