TIDMRXP
RNS Number : 6490Z
Roxi Petroleum Plc
20 March 2012
For immediate release 20 March 2012
Roxi Petroleum plc
("Roxi" or the "Company")
BNG Farm-out
Roxi, the Central Asian oil and gas company with a focus on
Kazakhstan, is pleased to announce that Bakmura LLP ("Bakmura"), a
subsidiary of the Korean National Oil Corporation ("KNOC"), has
agreed to pay an initial cash consideration of $5 million and to
invest a further $25 million in the BNG Contract Area work
programme in return for a 35 per cent interest in the BNG Contract
Area license.
Background
Contract Area
Roxi acquired a 58.41 per cent interest in the BNG Contract area
in 2008 as part of its acquisition of a 59 per cent interest in
Eragon PLC. The license period was extended in 2011 until June
2013, after which further license extensions can be applied for
subject to compliance with the existing work programme.
The block covers an area of 1,561 square kilometres and lies in
the South Emba Sub-basin 40 kilometres southeast of the Tengiz
field. 3D seismic data has been acquired covering 1,376 km2.
Independent assessment
In June 2011, Gafney Cline & Associates ("GCA") published an
independent estimation of resources based on the Company's
preliminary interpretation of approximately 1,400 square kilometres
of 3D seismic data, which had been acquired in 2009 and 2010.
The Company identified 30 prospects and a further 7 leads within
the BNG Contract Area. The prospects ranged in size from 3 to over
80 million barrels of oil ("mmbo"), with a total aggregate gross
resource potential of over 500 mmbo of "Best Estimate Prospective
Resources".
The geological chance of success, or risk, assigned by GCA to
the majority of these prospects ranged from around 20% to over 80%
in one or two cases. The less well defined leads varied from 6 to
over 130 mmbo in size, having an aggregate potential of a further
400 mmbo, and a chance of success assigned by GCA of less than
15%.
In addition to these prospective resources, a further 13 mmbo
estimated for the South Yelemes field were classified by GCA as
Contingent Resources.
GCA reported that the Yelemes field development was contingent
on further testing of the Neocomian dolomite reservoir, extension
of the Sub-Surface User Contract ("SSUC") and subsequent extension
of Pilot Production consents.
The total Risked Most Likely Prospective and Contingent
Resources on the BNG block was estimated to be 215 mmbo.
Recent developments
Earlier this month Roxi announced that it had drilled Well 136
to a depth of 3,008 metres and encountered oil between 2,442 and
3,008 metres.
Pilot production from the BNG Contract Area is expected to
commence later this year.
Canamens farm-out
In 2009 Roxi entered into a farm-out of up to 35 per cent of the
BNG Contract Area to Canamens BNG B.V., for an initial fee of $7
million and a further $50 million to be spent on the BNG work
programme. Canamens advanced $38 million of the $50 million due for
the BNG Work Programme before formally advising Roxi that Canamens
no longer wished to continue funding BNG in March 2011. Later in
the year Canamens withdrew from Kazakhstan.
In May 2011, Roxi announced that it had agreed to cancel the
original Canamens farm-out arrangements and return the 35 per cent
interest to BNG Energy BV. Canamens also agreed to assign back to
BNG Energy BV all loans in return for Roxi agreeing to pay a 1.5
per cent royalty in perpetuity based upon production volumes from
the BNG Contract Area. On cancellation of the Canamens farm-out
Roxi's interest in BNG was restored to 58.41 per cent.
Following Canamens decision not to continue to fund the BNG Work
Programme BNG's development work has been funded by Roxi,
principally from loans from its Executive Director and largest
shareholder Mr Kuat Oraziman.
Bakmura farm-out
Under the proposed arrangements with Bakmura (the "Bakmura
Agreements") Roxi will sell a 35 per cent interest in the BNG
Contract Area license to Bakmura LLP ("Bakmura"), a wholly owned
subsidiary of KNOC Kaz B.V., which in turn is wholly owned by KNOC,
for an initial cash consideration of $5 million plus an obligation
to fund a further $25 million of the BNG work programme. In
consideration for funding the work programme, Bakmura will be
entitled to recoup its investment from future production from the
license in priority to payments due to Roxi.
It is likely that the $39 million accounting gain on the
carrying value of the BNG Contract Area, which arose in the interim
statements following the cancelation of the previous Canamens
farm-out arrangements, will be offset.
The $5 million cash consideration payable to Roxi will be used
for general working capital purposes.
Operator status
Roxi is also pleased to announce that Bakmura will, subject to
the approval of the Kazakh authorities, become the operator of the
BNG Contract Area.
Bakmura option to acquire a stake in Galaz
Under the Bakmura Agreements, Roxi has given Bakmura an optionto
transfer Roxi's 32 per cent interest in Galaz & Company LLP
(the "Galaz Option") to Bakmura. The Galaz Option is exercisable
before 7 June 2013, if the oil exploration project in the BNG
Contract Area turns out to be economically not viable and Bakmura
has funded the current BNG work commitments in full. As part of the
Galaz Option, Bakmura are also obliged to direct any unspent
portion of the $25 million BNG work programme funding to Galaz
Energy BV.
Should Bakmura exercise the Galaz Option, Bakmura would be
required to pay Galaz Energy BV an additional $5 million. The Galaz
Option can be exercised from 7 April 2013 and the consent of the
Kazakh authorities would also be required.
Following the exercise of the Galaz Option Roxi's interest in
the BNG Contract Area license would increase to 58.41 per cent
while Roxi's interest in the Galaz Contract Area is expected to
decrease to 15.34 per cent.
Roxi Guarantees
Roxi has provided a guarantee to Bakmura that, should the Galaz
Option be exercised and for any reason the required Kazakh
regulatory consents not be received, Roxi would undertake to repay
the investment made by Bakmura in the BNG and Galaz Contract Areas
from Roxi's share of the future production revenues of the Galaz
Contract Area.
Roxi shareholder approval
Due to the size of the deal, the proposed Bakmura Agreements are
subject to the approval of Roxi shareholders. A General Meeting of
Roxi shareholders will be convened to coincide with the Company's
Annual General Meeting expected to be held in mid June 2012 to
consider the resolutions required to approve the Bakmura
Agreements.
The Ordinary resolutions to be put to the General Meeting will
require 50 per cent of those voting to be in favour for the
proposed Bakmura farm-out for it to be approved. Irrevocable
undertakings have been given to Bakmura by shareholders holding
335,165,716 Roxi shares representing some 55 per cent of the issued
share capital to convene and vote in favour of the Bakmura
Agreements.
BNG work programme commitments
The Bakmura investment will facilitate the fulfilment of the
existing obligations of BNG Ltd to drill wells of a depth in
aggregate of a further 12,000 meters before the date by when an
application to extend the current license will be required by June
2013.
David Wilkes, CEO commented
"Completing a farm-out of the BNG Contract Area was a key
priority for Roxi.
I am delighted that Bakmura is to be our partner in further
developing this important asset. The funding provided by Bakmura
will allow us to explore some of the deeper horizons in the BNG
Contract Area where we believe greater value exists for our
shareholders.
Bakmura is a subsidiary of KNOC, a world class operator with
proven development experience in Kazakhstan. They also have the
skills, experience and resources to bring the BNG asset to
commercial production."
Enquiries
Roxi Petroleum plc
David Wilkes CEO +7 727 244 0920
Strand Hanson Limited
Andrew Emmott / Cordelia Orr-Ewing +44 (0) 20 7409 3494
Renaissance Capital Limited
John Porter / James Etherington +44 (0) 20 7367 8242
Buchanan (Financial PR)
Tim Thompson / Ben Romney / Helen Chan +44 (0) 20 7466 5000
Qualified Person
Mr. Hyunsik Jang, Chief Operating Officer of the Company, has
reviewed and approved the technical disclosures in this
announcement. He holds a BSc in Geology and has 25 years of
international experience of exploration, appraisal and development
of oilfields in a variety of environments.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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