DEA to acquire Sierra Oil & Gas to boost Mexican upstream portfolio

5 December 2018 (Last Updated December 5th, 2018 18:07)

German oil and gas firm DEA has entered an agreement to purchase Sierra Oil & Gas, an independent company with interests in six exploration and appraisal blocks in Mexico.

DEA to acquire Sierra Oil & Gas to boost Mexican upstream portfolio
DEA headquarters in Hamburg, Germany. Credit: DEA Deutsche Erdoel AG.

German oil and gas firm DEA has entered an agreement to purchase Sierra Oil & Gas, an independent company with interests in six exploration and appraisal blocks in Mexico.

Although the companies did not disclose the financial terms of the transaction, the Financial Times reported that the deal was worth $500m.

The acquisition is set to strengthen DEA’s position in Mexico and will give significant interest in the Zama shallow water discovery, which is operated by US firm Talos Energy.

The transaction will give DEA interests in around 9,400km² of exploration acreage in the core of the Sureste basin.

“This acquisition will further strengthen Mexico as a core region for the combined company, which will become one of the major players in Mexico.”

Established in 2014, Sierra owns a 40% non-operated interest in a block where a significant portion of the Zama discovery is located.

Zama is estimated to contain between 400 million and 800 million barrels of oil equivalent in recoverable volumes. First oil from the discovery is expected by 2022/2023.

Once the acquisition is completed, DEA will have stakes in one onshore production block and ten exploration blocks. The portfolio is estimated to require an investment of more than $2bn over the next five years.

DEA CEO Maria Moraeus Hanssen said: “The acquisition of Sierra will allow DEA to achieve materiality in the highly strategic and competitive Mexican upstream market and provide us with a high-quality exploration and appraisal portfolio in one of the world’s most sought-after offshore basins, as well as a strong team.

“Upon completion of the planned merger of DEA and Wintershall, this acquisition will further strengthen Mexico as a core region for the combined company, which will become one of the major players in Mexico.”

Subject to receipt of regulatory approvals, the closure of the transaction is anticipated in the first half of next year.

The deal comes after DEA reached a merger agreement with Wintershall earlier this year to create a large and independent European exploration and production company.

DEA is a subsidiary of investment firm LetterOne Group’s business unit L1 Energy.