AUSTRALIA’S AWE Limited will sell its 10 per cent stake in the Sugarloaf area of mutual interest (AMI) for US$190 million, using funds raised to pay down debts and strengthen its balance sheet.

Operated by US-based Marathon Oil, the Sugarloaf AMI covers about 9,700 hectares in the Eagle Ford region of Texas.

AWE will sell the stake to private Houston based company Carrier Energy Partners for the agreed sum plus an additional US$9 million payment for past drilling costs.

In an announcement, AWE said it would be left with a net cash position of about A$60 million after the sale is completed, though its profit after tax would be about A$16 million, with the transaction due to be completed by the end of March.

AWE managing director Bruce Clement said the company had worked with Marathon to develop the asset and help realise its potential over the past few years.

“With Sugarloaf now entering a more mature phase of production and development, the time is right to divest this asset and focus on the next major project for AWE – the Waitsia gas project in Western Australia,” he said.

“The sale of the Sugarloaf asset for A$271 million is an excellent outcome for AWE and demonstrates the Company’s proactive approach to portfolio management and its ability to consistently deliver significant value, even in a low oil price environment,” he said.

In the company’s quarterly announcement, Mr Clement said the Sugarloaf sale would mean the company had removed substantial recurring development expenditure while refocusing on high value gas assets in the near term.

“Exploration and development costs are planned to reduce further during the remainder of 2015-2016 and we will continue to manage our asset portfolio and costs to ensure a strong and robust balance sheet so that we can pursue significant value-adding projects,” he said.

Production from Sugarloaf was up 30% in the December quarter, helping to drive AWE’s quarterly production up 7% on the previous quarter to 1.5 million barrels of oil equivalent.

Aside from operator Marathon, which holds a 55% stake in Sugarloaf, other partners in the project include Baytex Limited (28.1%), Empyrean Energy (3%) and Texas Crude Energy (2.9%).