TIDMSRSP
RNS Number : 3030J
Sirius Petroleum PLC
04 December 2018
Sirius Petroleum Plc
("Sirius" or "the Company")
Acquisition of 75% Shareholding in Precision Energy
Provides access to near-term production growth and low risk
exploration potential
Complementary asset opportunity located adjacent to Ororo
Sirius Petroleum (AIM: SRSP), the Nigeria-focused oil and gas
development and production company, is pleased to announce that it
has entered into a conditional sale and purchase agreement with
Precision Energy Group ("PEG") to acquire a 75% shareholding in
Precision Energy Tetra 109 (BVI) Ltd ( "Sirius JV" or the
"Acquisition", respectively), a wholly owned subsidiary of PEG.
Sirius JV has in turn conditionally agreed to acquire a direct 40%
equity and up to 80% economic interest in Tetrarch Limited
("Tetrarch") from Tetrarch Holdings Limited (together with the
Acquisition, the "Transactions").
Summary
-- Tetrarch is an 80% shareholder in Tetra Energy Services
Limited ("Tetra"), which wholly owns Tetra Petroleum Oilfield
Services Ltd ("TPOS"). TPOS has entered into a petroleum services
contract ("PSC") to provide certain petroleum services to the
owners of the licence known as OML 109.
-- Once the Transactions are completed and after recovery of its
costs, Sirius will hold an effective indirect economic 30% interest
in the cash flows of TPOS through its economic interest in
Tetrarch.
-- Subject to completion of the Transactions, Sirius JV intends
to provide petroleum services to Tetrarch and therefore TPOS in
relation to the PSC in which Sirius and its operational partners
expect to take an active role in providing such services.
-- There is only nominal consideration payable on the
Acquisition, which is conditional upon, among other things, Sirius
sourcing for Sirius JV US$40 million of external debt funding, to
be provided by a third-party funder, to be deployed towards the
execution of a minimum work programme commitment ("MWPC") on the
Ejulebe field, a producing field located in the North East corner
of OML109. Sirius is in advanced discussions with a third-party
funder for the provision of the required US$40 million debt
funding, which is intended to be secured directly against the
cashflows generated as a result of the Ejulebe MWPC.
-- The MWPC is designed to boost current production on the
Ejulebe Field from circa 250 barrels of oil per day ("bbls/d") to
over 5,000 bbl/d, by providing for:
o Stage A - MWPC: workover on 1 existing well and the drilling
of one new development well, EJ-9 and, at Sirius JV's option, 2
additional work-overs or side-tracks of existing wells.
o Stage B - MWPC: 1 exploration well on the EJ-WSW prospect -
the CPR prepared by PanTerra Geoconsultants, December 2017 ("CPR")
has attributed gross unrisked P50 resources of 32-38 mmboe.
-- EJ-WSW is located in close proximity to the Ejulebe field and
the CPR notes that it is expected to have similar reservoir
characteristics to the Ejulebe field. In addition, the close
proximity of the prospect to the existing Ejulebe production
facilities would allow a fast-track development for early cash-flow
in the event of a commercial discovery, and potential monetization
of gas resources in accordance with the Nigerian government's
stated objectives. The CPR has estimated a 51% Chance of
Commerciality to the EJ-WSW exploration well.
Bobo Kuti, CEO of Sirius, said: "The proposed acquisition would
be a significant addition to the Sirius portfolio and we look
forward to working with the co-owners of the asset and our
operational partners to boost production on the Ejulebe field. We
are also excited to explore the EJ-WSW prospect, which, if
successful, could potentially add material reserves."
OML 109
OML 109 is an Oil Mining Licence in shallow waters offshore
Nigeria, initially awarded in 1991 as an Oil Prospecting Licence to
Atlas Petroleum Ltd under the indigenous sole risk fiscal regime
and as such has no government participation. In 1996 it was
successfully converted to OML109, and in 2017 the licence was
formally extended by the Nigerian government for a period of 20
years.
OML 109 is located approximately 30km due south of OML 95, where
the Ororo field is located. Encompassing 191,000 acres or 773
square kilometres, the OML 109 block has only been addressed with
three exploration wells in its entire history, the first in 1966.
Extensive oil and gas infrastructure exists in and around the
block, including that of the Ejulebe field.
The Ejulebe field comprises some 15 hydrocarbon-bearing
horizons, producing oil, associated and non-associated gas
(including condensate). The field has produced approximately 14
mmbbls since 1998, is currently producing c.250 bbl/d and has gross
remaining 2P reserves of 4.7 mmbbls, according to the CPR.
The EJ-WSW and EJ-SW exploration prospects, which according to
the CPR contain respectively gross unrisked P50 prospective
resources of 32-38 mmboe and 32-53 mmboe are close to the Ejulebe
field and are expected to have similar reservoir characteristics to
the Ejulebe field.
The wider OML 109 "Joint Exploration and Development Area"
contains prospects and leads that have been ascribed gross unrisked
P50 prospective resources of 266mmboe, according to a Resource
Review completed by Panterra Geoconsultants in February 2018.
OML 109 ownership structure and the Transactions
-- Current owners of OML 109 since 1996 are Atlas Petroleum
International Limited ("Atlas") (70%) (Operator) and Summit Oil
& Gas Worldwide Ltd ("SOGW") (30%).
-- Atlas and SOGW have entered into the PSC with TPOS, a wholly
owned subsidiary of Tetra (owned by Tetrarch 80% and Fomak Limited
20%), relating to the provision of services for the exploration,
development and production of hydrocarbons from OML 109. Tetra is
an indigenous oil services company, which has been providing the
services to date.
-- Sirius JV has agreed to acquire a 40% equity interest in
Tetrarch from Tetrarch Holdings Limited for a nominal
consideration, and is intended to provide services to Tetrarch in
relation to the PSC. This acquisition is not subject to any
governmental consent, but compliance with local content regulations
will be required.
-- Sirius will secure its 30% beneficial equity interest in
Tetrarch via the acquisition of 75% of Sirius JV.
The acquisition by Sirius JV of the interest in Tetrarch is
conditional upon, among other things, Sirius having arranged for an
initial US$40 million of debt funding, to be provided to Sirius JV
by a third-party lender, necessary to fund the drilling and
completion of the EJ-9 development well on the Ejulebe field,
together with 1 workover on an existing well (together "Stage A
MWPC") and one exploration well under the MWPC ("Stage B MWPC"). If
the conditions are not satisfied within 45 days of signing, the
Transactions will not proceed.
Following completion of the Transactions, Sirius JV's shares in
Tetrarch will be held in escrow, until the Stage A MWPC and Stage B
MWPC are completed. If Stage A MWPC is not commenced within 90 days
of the Transactions having completed, Tetrarch will have the right
to terminate the Transactions. On completion of Stage A MWPC and
Stage B MWPC Sirius JV will be entitled to a preferential cash flow
of 80% of net revenues from Tetrarch for recovery of all approved
costs funded by it pursuant to the MWPC with the balance shared
pro-rata between all parties, then reverting to 40% following
recovery of those costs with 60% going to the asset owners. If
Stage A MWPC is completed, but Sirius JV does not spud the
exploration well as set out in Stage B MWPC immediately after that,
then all arrangements entered into between Sirius JV and Tetrarch
in relation to OML 109 will terminate. These provisions are subject
to Tetrarch's sole risk rights. The MWPC is subject to approval by
TPOS. Stage A MWPC and Stage B MWPC are budgeted to cost
approximately US$40 million in aggregate for which Sirius will
arrange a US$40 million debt facility for Sirius JV. Sirius
estimates that, together with cash flows expected to be generated
from Tetrarch, the US$40 million debt facility will be more than
sufficient to cover both Stage A MWPC and Stage B MWPC. In the
event of an overrun, further funding may be required to complete
these stages of MWPC, in which case Sirius may be expected to
procure such funding. The terms relating to such eventuality are to
be included in the shareholders' agreement between the parties,
which is being negotiated.
In accordance with the above, Sirius has now signed a sale and
purchase agreement to acquire a 75% stake in Precision Energy Tetra
109 ("Sirius JV") from PEG and the interests being acquired by
Sirius JV, implying a beneficial 30% equity interest in Tetrarch,
for a nominal consideration of GBP1. Sirius is expected to arrange
the funding required to finance the MWPC, amounting to at least
US$40 million from a third-party funder with whom Sirius is in
advanced discussions. If the conditions are not satisfied within 45
days of signing, unless such period is extended by the parties, the
Acquisition will not proceed. For clarification, Sirius' role with
respect to the US$40 million debt financing is to source the debt
financing and not to assume the debt liability itself, which will
sit with Sirius JV.
The Acquisition is conditional, among other things, upon the
acquisition of shares in Tetrarch by Sirius JV becoming
unconditional (other than in relation to the provision of funding)
and upon Sirius having arranged the US$40 million funding required
to complete the acquisition of shares in Tetrarch by Sirius JV.
The obligations set out under the PSC and the MWPC are industry
standard, and Sirius intends to procure petroleum services from
third party service providers on behalf of Sirius JV and will
obtain industry standard insurance before commencing any operations
or making any material expenditures. On this basis, Sirius has
provided a conditional parent company guarantee, under which,
effective from the closing of the Transactions, Sirius will
guarantee to Tetrarch prompt, faithful and full performance and
payment of all obligations of Sirius JV under the MWPC in relation
to the petroleum operations. If the closing of the Transactions
does not take place within 45 days of signing then the Transactions
will terminate, and the guarantee will automatically fall away.
The current owners of Tetrarch have advised Sirius that the
losses attributable to the assets to be owned by Sirius JV for the
six-month period ended 30(th) June 2018 are estimated to be
US$750,000 (unaudited).
The Company is only able to ascribe a value to the Transactions
which is equal to the consideration until such time that it is able
to implement the Stage A MWPC. The Company will provide updates on
the Acquisition and Transactions in due course. There can be no
guarantee that the Acquisition and/or Transactions will
complete.
Qualified Person Review
This release has been reviewed by and approved by Martin
Richards MA (Oxon), MEng (Heriot-Watt), Subsurface Manager for
Sirius Petroleum plc, who has over 30 years' experience as a
reservoir engineer in the oil industry and is a member of the
Society of Petroleum Evaluation Engineers. Martin Richards has
consented to the inclusion of the technical information in this
release in the form and context in which it appears.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
Ends
Enquiries:
Sirius Petroleum +44 20 3740 7460
Bobo Kuti, CEO
Jack Pryde, Chairman
Mark Henderson, Chief Financial Officer
Cantor Fitzgerald Europe +44 20 7894 7000
David Porter/Nick Tulloch
Gable Communications +44 20 7193 7463
John Bick srsp@gablecommunications.com
About Sirius Petroleum
The Company's strategy is to target proven opportunities and
maximize hydrocarbon production and recovery through the
acquisition of discovered assets in Nigeria, with a particular
focus on shallow offshore areas and the realisation of upside
potential through appraisal activities.
Sirius's initial focus is the Ororo field, which was originally
operated by Chevron in 1986. Chevron drilled Ororo-1 and
hydrocarbons were discovered in seven sandstone reservoirs (D1 to
D5, F and G). Four of the reservoirs in the original Ororo-1 well
were tested, two produced oil (D3 and G) at a combined rate of
2,800 bopd and two produced gas condensate (D4 and D5).
The Ororo field is located within OML 95 in the Niger Delta,
offshore Nigeria, in the western part of the prolific Niger Delta
petroleum system. It lies in shallow waters offshore Ondo State in
water depths ranging between 23ft and 27ft. The field is adjacent
to the Mina, West Isan, Ewan, Eko and Parabe fields, all of which
are operated by Chevron.
Sirius has a 40% economic interest under a Financial &
Technical Service Agreement and entered into a Joint Operating
Agreement in August 2017 with its indigenous partners Owena Oil
& Gas (100% Owena State owned entity) and Guarantee Petroleum,
who own 27% and 33% respectively. According to the Ororo CPR, the
mid-case gross recoverable 2C contingent resources are 24mmboe as
defined by the Society of Petroleum Engineers - Petroleum Resources
Management System.
Following the completion of the first phase, two-well drilling
programme at Ororo, Sirius intends to explore the possibility of
entering into appropriate arrangements to replicate Sirius'
arrangements with its operational partners
OML 109 is a 773 sq.km licence located in shallow waters
offshore Nigeria, which contains the Ejulebe field which has
produced 14 mmbbls to date and has been attributed gross 2P
remaining reserves of 4.7 mmbbls and gross 2C contingent resources
of 4.4 mmbbls as defined by the Society of Petroleum Engineers -
Petroleum Resources Management System.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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