Leading private equity company Citadel Capital has reached an agreement to sell its 100 per cent stake in National Petroleum Company Egypt (NPC Egypt) to Sea Dragon Energy, a Calgary-based exploration and development firm for $147.5 million.

The sales agreement is the first of several transactions that will see Citadel Capital rationalise its portfolio by divesting non-core assets; offers significant upside potential to both the company and its limited partners.

Golden Crescent Investments, a Citadel Capital Opportunity-Specific Fund, had this week signed the share purchase agreement for the NPC deal.

As per the deal, Sea Dragon will pay cash and share consideration equal to $147.5 million - comprising $60 million in cash and 350 million of its common shares - to Golden Crescent at the closing of the transaction at a deemed price of $0.25 per share, the Citadel Capital said in a statement.

Concurrent with the execution of the share purchase deal, Sea Dragon delivered $2.5 million into escrow as an initial deposit against the payment of the cash consideration, it stated.

At the closing of the transaction, Golden Crescent will be granted a 20 per cent after-payout net profits interest from production attributable to a field comprising part of an existing NPC Egypt development asset that Sea Dragon expects to bring onstream during the first quarter of 2013, said the company statement.

Golden Crescent will also be granted a 17.5 per cent after-payout net profits interest from production attributable to the balance of the same development asset, it added.

Commenting on the deal, Citadel Capital chairman and founder Dr Ahmed Heikal said, “This is the first of several transactions to which we have alluded in recent months that will see Citadel Capital rationalize its portfolio through the divestiture of some non-core investments.”

The transaction is likely to be closed in late February or early March 2012, he added. 

Heikal said the cash proceeds from the sale will allow Citadel Capital to recoup additional funding it has extended to Golden Crescent over and above the firm’s equity investment, with the balance remaining distributed pro-rata among the remaining Golden Crescent lenders.

Citadel Capital owns 15.05 per cent of Golden Crescent with management control; the balance of Golden Crescent’s equity is held by limited partners.

The transaction’s upside potential for Golden Crescent shareholders includes the potential appreciation of the Sea Dragon common shares received as share consideration, as well as the after-payout net profits interest.  

'In agreeing to sell to Sea Dragon, in which Golden Crescent will take a direct equity stake and receive an after-payout net profits interest, we are maximizing upside potential for Citadel Capital and our LPs,' said Heikal.

'Sea Dragon is headed by a world-class management team that has proven experience in the region’s upstream segment,' he added.

As per the agreement, Golden Crescent is entitled to designate a nominee for election to Sea Dragon’s board of directors for so long as it holds not less than 10 per cent of the company's issued and outstanding common shares.

Sea Dragon is led by Said Arrata, a 40-year veteran of the oil and gas industry who previously built Centurion Energy International, which was acquired by regional heavyweight Dana Gas in 2007 in a $950 million deal.

It is presently engaged in the exploration and development of two concessions in Egypt, including the NW Gemsa concession (10 per cent working interest) and the Kom Ombo concession (50 per cent working interest).-TradeArabia News Service