By Alex MacDonald

LONDON--Shares in Empyrean Energy PLC(EME.LN) jumped Monday after the U.S.-focused oil and gas explorer said it agreed to sell its 3% stake in the U.S. flagship Sugarloaf AMI shale project to Carrier Energy Partners II, LLC for up to $71.5 million.

The U.K.-listed firm decided to sell its stake in the Texas asset, which is majority-owned and operated by Marathon Oil Corp (MRO), because the additional financing required to support its continued participation in the project would have resulted in an unacceptable cost in the current low oil price environment, the company said in a statement.

Empyrean's shares rose nearly 43% to 7.125 pence a share by 0937 GMT, resulting in a market capitalization of GBP16 million ($23 million).

Empyrean will earn $61.5 million upfront for the stake sale and then another $10 million if certain conditions are met. The company expects the deal to close in the first quarter of this year and has already secured irrevocable undertakings from shareholders representing 23.6% of Empyrean's shares to vote in favor of the deal. This includes Empyrean Chief Executive Tom Kelly, who owns a 9.4% stake in the firm.

"We believe that we have reached the right time to realise the value of the Sugarloaf asset and de-risk our position against continued depressed oil prices," said Mr. Kelly.

The Sugarloaf AMI project had 290 wells in production and an inventory of a further 26 wells to be drilled as of the end of last year. Empyrean generated $5.8 million in revenue and $3.5 million in pretax profit from its Sugarloaf AMI stake during the six months ended Sep 30. This was based on Empyrean's attributable production of 224,182 barrels of oil equivalent from the project.

Following the transaction, Empyrean will hold a nearly 60% stake in the Eagle Oil Pool development project in southern California, a 7.5% stake in two producing wells and a smaller interest in another six producing wells in the Sugarloaf Block A operated by ConocoPhillips (COP), and a 10% stake in the Riverbend project in Texas.

-Write to Alex MacDonald at alex.macdonald@wsj.com

(END) Dow Jones Newswires

January 18, 2016 05:01 ET (10:01 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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