Brazilian exploration and production firms Petrobras and Murphy Oil have signed an agreement through their subsidiaries to form a joint venture (JV) company to carry out oil and gas exploration in the Gulf of Mexico.

Upon completion, Petrobras America (PAI) will hold a 20% stake in the JV, while Murphy Exploration & Production Company – US will own the remaining 80% interest.

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The companies will contribute their respective producing oil and gas assets in the Gulf of Mexico to the JV, which has an estimated average production of around 75,000 barrels of oil equivalent per day in the fourth quarter of this year.

The JV’s asset base comprises deepwater fields including Cascade, Chinook, St. Malo, Lucius and Hadrian North, Cottonwood, Hadrian South, Dalmatian, Front Runner, Clipper, Habanero, Kodiak, Medusa and Thunder Hawk.

In addition, the JV has shallow water fields, including South Marsh Island 280, Garden Banks 200/201 and Tahoe.

“Under the agreement, PAI will receive up to $1.1bn as consideration for the deal, with a cash compensation of $900m.”

Under the agreement, PAI will receive up to $1.1bn as consideration for the deal, with a cash compensation of $900m.

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The company will receive additional contingent payments up to $150m until 2025. The transaction is part of Petrobras’ divestment programme targeting $21bn over last year and this year.

In a statement, Petrobras said: “The JV represents an important step for Petrobras, as part of its 2018-2022 Business and Management Plan, allowing, in addition to cash inflow, the sharing of investments, resulting in a final portfolio with a better balance of risk-return through a new business model in the US with a partner with experience in the region and recognised for its operational and safety expertise, cost discipline and technical qualification.”

Murphy Oil Corporation is engaged in offshore production in Southeast Asia, Canada and the Gulf of Mexico. The company also has onshore producing assets in North America.

Completion of the deal is set to take place later this year and is conditional on the receipt of relevant US government approvals.