Oil and gas producer Cairn Energy Plc said July 27 it will sell its Senegal interests to Russia's LUKOIL for up to $400 million and intends to return at least $250 million as a special dividend after sale completion, sending its shares up 5%.

Cairn said it will sell its entire 40% interest in the Rufisque, Sangomar and Sangomar Deep (RSSD) contract area and added that the sale and special dividend was consistent with its "disciplined approach" to portfolio management and capital allocation.

Shares in Cairn Energy rose 5.2% to 133.5 pence by 2:23 a.m. CT (7:23 GMT).

The sale comes at a time when the industry is reeling from declining demand in the face of the COVID-19 pandemic and a dramatic slide in crude prices.

Earlier this year, Cairn had said it was assessing "substantial initiatives to reduce and re-phase" investment in the $4.2 billion Sangomar oil development project, along with its partners, including Woodside and FAR.

According to LUKOIL's estimates, the recoverable hydrocarbon reserves of the Sangomar field total about 500 million barrels of oil equivalent. It plans to launch the field in 2023 with designed production level of 5 million tons of crude oil per year.

Entering the project with already explored reserves at early stage of their development is fully in line with LUKOIL's strategy and allows it to reinforce its presence in West Africa, according to the company's president Vagit Alekperov.

The cash consideration payable on completion is $300 million, along with further contingent consideration of up to $100 million dependent on the timing of first oil and the average Brent oil price during the first six months of production.