Herbert Smith Freehills has advised German energy giant E.ON on a landmark oil and gas asset disposal to the FTSE 250 company Premier Oil. The deal was signed and announced on 13 January 2016.

E.ON has signed an agreement to sell 100% of its shares in its UK E&P Subsidiaries to Premier Oil. The transaction value is US$0.12 billion as at the effective date of 1 January 2015. As a result of the transaction, E.ON will also release provisions for asset retirement obligations (decommissioning obligations) associated with the business of US$0.45 billion as well as realising US$0.05 billion of value for other adjustments, including the 2015 hedge positions. The transaction will therefore have a total Economic Net Debt Impact to E.ON of US$0.62 billion. In addition, E.ON will retain cash of approximately US$0.15 billion which existed at the effective date.

The UK oil and gas upstream portfolio comprises equity interests in 40 licenses, including a 5.20% interest in the Elgin-Franklin field, 47.00% interest in the Babbage field and a 50.00% interest in the Tolmount discovery. The divestment of E.ON E&P UK represents the second and final step in E.ON´s review process of the Exploration & Production North Sea business, following the sale of the Norway E&P business which concluded in December 2015.

The sale, which is subject to necessary UK regulatory approvals and shareholder approvals. It is expected to be closed in the first half of 2016.

The Herbert Smith Freehills team was led by partner and co-head of Energy, Anna Howell and partner Steven Dalton with associates Reza Dadbakhsh, Mitasha Chandok, Kelly Powers and Ade Adesiyan. Tax partner Isaac Zailer and associate Perminder Gainda also provided support.