TIDMPXOG
RNS Number : 6257N
Prospex Oil and Gas PLC
10 August 2017
Prospex Oil and Gas Plc / Index: AIM / Epic: PXOG / Sector: Oil
and Gas
10 August 2017
Prospex Oil and Gas Plc
('Prospex' or the 'Company')
Acquires 50% interest in Large Gas Exploration Licence in
Romania
Prospex Oil and Gas Plc, the AIM quoted investment company, is
pleased to announce the acquisition, through its 100% owned
subsidiary PXOG Massey Ltd ('PXOG'), of a 50% economic interest in
the Exploration Area of the EIV-1 Suceava Concession (the
'Concession' or 'Suceava') which is located in a proven hydrocarbon
basin in North East Romania for a total consideration of EUR750,000
('the Acquisition'). In addition the Company has undertaken to
cover its share of the work programme expenditure for H2 2017 of up
to EUR550,000.
The Acquisition consists of an Exploration Area, which has an
undeveloped discovery (Grancesti SE-1) and a number of prospects
(at varying stages of development) and leads. The balance of the
exploration area interest is held by Raffles Energy S.R.L.
('Raffles' or 'the Operator'), an established gas producer in
Romania. The Acquisition is in line with the Company's focus on
high impact onshore and shallow offshore European opportunities
with short timelines to production. Suceava also contains two
producing fields, which are part of two separate production
licences operated by the seller*, and as such are not part of the
Acquisition.
Suceava: a proven play with multiple low cost, low risk
opportunities with potential to rapidly start production on
discovery
-- Suceava provides Prospex with an excellent platform to build
a significant presence in a country with prolific petroleum systems
and a variety of hydrocarbon plays. Even with a long history of
E&P, Romania still offers untapped hydrocarbon opportunities
based on the application of new technology and drilling
techniques.
-- Several discoveries, prospects and leads are already mapped
on the 2D seismic grid consisting of ca 1,600km of lines that
provide a suitable coverage of the Suceava prospective areas
distributed within the concession area (ca 1,734 sq km)
-- Two of which are near term priorities:
1. The Bainet Prospect ("Bainet"), a shallow, 600m biogenic gas
target covered by 3D seismic, which the Company and Raffles intend
to drill in September 2017
o Bainet lies on trend with similar fields producing from good
quality Salmatian reservoirs on the Concession as well as with
analogue gas fields producing conventional high-calorific value
natural gas (over 98% methane content) in the adjoining Bilca Gas
Production Area of bordering EIII-1 Brodina Block
o It is a well-defined structural closure on seismic, analogue
to other producing areas in the vicinity, which is additionally
supported by an amplitude variation with offset ('AVO') response
similar to nearby fields and has been assigned internal gross
prospective resources of approximately 1.5bcf recoverable
o Gross well cost including completion as a production well is
estimated to be EUR800,000, for which the Company is required to
pay its share.
o Assuming success, the Operator plans to get Bainet on
production via a relatively short tie in to the flow line
connecting the Climauti gas field to the Bilca gas processing
plant. Subject to permitting, the flowline tie-in construction work
is expected to be completed in approximately three months.
2. Grancesti SE-1 discovery flowed gas at a rate of 1.2MMscfpd/d
over a limited short test from the Sarmatian reservoir at a depth
of ca 550m
o Drilled in 2005 to c. 2,300m by previous operator focused on a
deeper oil target
o Work over and recompletion of the well as a gas producer to be
undertaken once land access resolved
o Within c. 1.5km distance of high pressure pipeline grid
operated by Transgaz
Four additional prospects and one lead identified by the
Operator
-- Significant scope to drill additional low cost, low risk
wells targeting gas in 2018 and beyond - subject to securing an
extension to the exploration area of the concession which expires
end of 2017
-- Drilling of the Bainet prospect and the work over at
Grancesti, if accessible, satisfy the existing exploration phase
commitments
-- Prospex estimates the aggregate gross recoverable gas
(unrisked) in a range from 17 to 56 bcf using standard
probabilistic methods
Acquisition Details
-- Asset Purchase Agreement ('APA') and Joint Operating Agreement ('JOA') signed with Raffles
-- Under the APA the total consideration is EUR750,000, with
initial payment of EUR400,000 and a deferred consideration of
EUR350,000, which is due once the Bainet well reaches its target
depth (expected in the second half of September 2017).
-- Consideration to be settled using existing cash resources
-- The Company has committed to provide up to EUR550,000 for its
share of the H2 2017 work programme, for which Prospex will need to
raise further funds, most likely through new equity.
Bill Smith, Non-executive Chairman, commented: "Suceava ticks
all the boxes we look for in a project: located in a proven
hydrocarbon region of Europe; access to historic data including
well logs that are fit for purpose; long pipeline of robust leads
and prospects; near term value triggers in the form of new
drilling; established routes to market; and low cost, both in terms
of the acquisition itself and drilling.
"Not only does this Acquisition enable us to deliver on our
objective to drill a well in 2017, it also provides us with an
excellent platform from which we can build a portfolio of interests
in a country with an established oil and gas industry, excellent
infrastructure, and supportive regulatory and fiscal regimes. The
presence of operators of the calibre of Exxon Mobil, Repsol, OMV
and Lukoil in Romania in our view is testament to this. The next
few months promise to be an exciting period for Prospex, and with
this in mind, I look forward to providing further updates on our
progress in due course."
Further Information
PXOG is acquiring a 50% economic interest by being party to the
JOA that assigns income and costs relating to activity on the
exploration area in line with the proportional ownership. In
addition to being a party to the JOA under the APA, Raffles has
agreed to assign to PXOG Massey a notional 15% working interest of
the Petroleum Agreement for the Suceava Concession. Zeta Petroleum
(Suceava) SRL, as co-title holder of the Petroleum Agreement has
already provided its consent for this assignation, that is now
subject only to the National Agency for Mineral Resources ('NAMR')
approval. For the avoidance of doubt this does not entitle PXOG
Massey to any economic benefit of existing producing fields in the
Concession area.
The APA is broadly in a common industry standard format. It
provides for transfer of the economic interest under the APA and
JOA (discussed below) in the Suceava Exploration Area immediately
on execution and provides for a subsequent transfer of a share of
the over-arching Petroleum Agreement subject to the consent of
NAMR. NAMR's consent process is expected to take around three
months and requires PXOG to satisfy the Agency of its technical and
financial competence. In the APA there are a number of interim
period obligations imposed upon the Seller pending Completion of
the Petroleum Agreement Transfer to protect the Prospex's
interests. Third party supporting approvals have already been
granted and the transfer document is to be submitted to NAMR and
the consent process will begin immediately once documents have been
translated and certified.
The APA 's headline commercial terms are such that PXOG will pay
an initial consideration of EUR400,000 on Execution and a further
EUR350,000 once the Suceava Exploration Well reaches target depth.
The consideration funds are being applied by Raffles to the Well
Programme and Budget for the Suceava Exploration Well. The APA
contains commonplace industry standard warranties and indemnities
applicable to a transaction of this type.
The JOA again is broadly a standard international format
document containing terms one would ordinarily expect in such a
document. The document is the same in operative terms as the JOA
that applies in the adjacent producing blocks of Suceava. There are
standard provisions on exclusive operations, default, approval
procedures for work programmes and budgets, indemnification of the
Operator, and withdrawal. Approvals are required by both parties
and 70% of voting rights such that PXOG will not be outvoted and
its interests are protected. The JOA contains a right of first
offer where the other Party wishes to sell its interest.
The Suceava Well Programme and Budget and the corresponding
Authorisation for Expenditure of the Suceava Exploration Well are
agreed. Both the APA and JOA are written under English law.
* The production areas on the Concession consist of the Climauti
and Dornesti South gas fields, owned by seller and Zeta Petroleum
(Suceava) SRL. Climauti has produced since March 2011 and sells gas
into the national distribution network. Dornesti South came on
stream in December 2014 with gas being used to generate electricity
which in turn is sold into the local grid.
About Raffles Energy
Raffles Energy SRL is a well-established player in the Romanian
energy sector as (i) E&P upstream operator and title-holder of
several petroleum licences, and (ii) operator of two gas-to-power
plants, electricity producer and supplier. RESRL is fully licenced
operator by the National Agency for Mineral Resources and the
National Regulatory Authority for Energy and holds ISO 9001, OSHSAS
18001 and ISO 14001 certifications for Quality Management,
Environment Management and Health and Safety Management
systems.
Raffles Energy SRL operates a diverse portfolio of onshore gas
assets in Romania consisting of existing production (developed
reserves), near-term developments (discovered contingent resources
to be monetised via gas-to-pipe or gas-to-power solutions) and
further exploration potential (undrilled prospective resources).
Raffles Energy SRL interests are (i) Block EIII-1 Brodina - Bilca
Gas Production Area, including Bilca, Fratauti and Vicsani gas
fields and the Bilca Gas Processing Plant (62.5%), (ii) Block
EIII-1 Brodina - Voitinel Gas Development Area (50%), (iii) Block
EIV-1 Suceava Exploitation Areas, including Climauti-Ruda gas
fields cluster, Dornesti South gas field and Dornesti gas-to-power
plant (50%), (iv) Block EIV-1 Suceava Exploration Area (100%), and
(v) Block EIII-4 Bacau - Bacau North Gas Development Area,
including Lilieci gas field and Lilieci gas-to-power plant
(60%).
Raffles Energy SRL is a wholly owned subsidiary of Raffles (UK)
Limited (a private limited Company registered in England and Wales)
which is part of the Raffles Energy Group a privately funded
independent exploration and production company targeting
opportunities primarily in Europe and the Mediterranean Rim owned
ultimately by Mr Furkhat Ibragimov.
Competent Person Sign Off
Carlos J Venturini, Exploration Manager of Prospex Oil and Gas,
MSc, DIC, and who has over 35 years of relevant experience in the
international oil industry, has approved the technical information
contained in this announcement.
Mr Venturini is a Fellow of the Geological Society of London and
is an active member of the Petroleum Exploration Society of Great
Britain.
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").
* * ENDS * *
For further information visit www.prospexoilandgas.com or
contact the following:
Edward Dawson Prospex Oil and Gas Tel: +44 (0) 20
Plc 3586 1009
Rory Murphy Strand Hanson Limited Tel: +44 (0) 20
Ritchie Balmer 7409 3494
Jack Botros
Jon Belliss Beaufort Securities Tel: +44 (0) 20
Limited 7382 8300
Duncan Vasey Peterhouse Corporate Tel: +44 (0) 20
Finance 7469 0932
Frank Buhagiar St Brides Partners Tel: +44 (0) 20
Charlotte Page Ltd 7236 1177
Notes
Prospex Oil and Gas Plc is an AIM quoted investment company
focussed on high impact onshore and shallow offshore European
opportunities with short timelines to production. The Company's
management is looking to acquire undervalued projects with
multiple, tangible value trigger points that can be realised within
12 months of acquisition and then applying low cost re-evaluation
techniques to identify and de-risk prospects.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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