TIDMNTOG
RNS Number : 3090B
Nostra Terra Oil & Gas Company PLC
06 October 2015
6 October 2015
Nostra Terra Oil and Gas PLC
("Nostra Terra" or the "Company")
Acquisition of producing assets in Egypt
On 21 September 2015 Nostra Terra announced the intention to
establish a strategic joint venture company ("JVCO") owned 50-50
with Independent Resources plc ("Independent Resources") focused on
the acquisition of producing assets in the North Africa region.
Nostra Terra and Independent Resources are pleased to announce
that they have reached agreement with Transglobe Energy Corporation
("Transglobe") for the acquisition by JVCO of a 50 per cent
non-company operated interest in the East Ghazalat concession in
Egypt (the "Acquired Interest") from Transglobe (the "Acquisition")
for US$3.5 million. JVCO and Transglobe signed the Acquisition
Agreement on 2 October 2015. The Acquisition Agreement contains
certain conditions precedent to completion. JVCO expects completion
to occur later in October 2015.
Highlights
-- Current gross production from East Ghazalat is approximately
880 barrels of oil per day (bopd), based on average June 2015
production levels (440 bopd net to JVCO).
-- Gross Company 2P reserves attributable to the Acquired
Interest at the effective date of 30 June 2015 are estimated at
1,008,922 barrels of oil (DeGolyer and MacNaughton Canada Limited
estimate). In addition there are two natural gas discoveries on the
concession
-- There is an implied acquisition cost of US$3.47 per barrel of
2P oil reserves and US$7,955 per barrel of daily oil production
attributable to the Acquired Interest
-- The concession also includes two gas discoveries announced by
Transglobe on 28 August 2013 and 3 September 2014 in North Dabaa 1X
and North Dabaa 2X respectively. North Dabaa 1X tested at an
average rate of 16 million cubic feet per day (MMCFD) and 1,620
barrels per day of condensate. North Dabaa 2X tested at 18.7 MMCFD
and 542 barrels per day of condensate. No reserves have been
attributed for these discoveries.
-- The Acquisition Agreement provides that:
o JVCO is to acquire the entire issued share capital of
TransGlobe GOS Inc ("TransglobeGOS"), a company incorporated in the
Turks and Caicos Islands, from Transglobe Petroleum International
Inc., a wholly owned subsidiary of Transglobe which holds a 50 per
cent interest in the East Ghazalat concession
o Headline consideration of US$3.5 million to be satisfied
by:
-- US$1.0 million in cash at legal completion. US$200,000 of
this has been paid as a transaction deposit; and
-- the issue of a loan note from Transglobe for US$2.5
million.
-- The remaining cash element due will be initially funded from
cash and an existing third party loan facility arranged by Nostra
Terra.
o The deferred consideration, in the form of a loan note (the
"Deferred Consideration Loan Note"), is to be paid within two years
of legal completion. The principal of US$2.5 million repayable on
the Deferred Consideration Loan Note will be adjusted to
reflect:
-- the amount of net working capital at the effective date of 30
June 2015;
-- net cash flow attributable to the assets since the effective
date of 30 June 2015; and
-- deductions for valid claims under warranty and indemnity
provisions contained in the sale and purchase agreement.
o The Deferred Consideration Loan Note bears interest at 10 per
cent annum, payable on a semi-annual basis.
o The principal is repayable on or before the second anniversary
of legal completion.
o The Acquisition should complete later this month (subject to
satisfaction of certain conditions precedent specified in the
Acquisition Agreement).
Concession overview
The East Ghazalat Concession (the "Concession") is located in
the Western Desert region of Egypt, approximately 240 kilometres
southwest of the city of Cairo in a platform region over the
Sharib-Sheiba high which covers an area of approximately 626 square
kilometres. Field facilities are located 130 km south south west of
El Alamein, a city located on the Mediterranean coast 106 km west
of Alexandria.
The Concession is limited to the north by the southwestern
extension of the Alamein Basin. The southern part of the concession
is situated in the Abu Gharadig and Margin Basins, the former of
which holds some of the greatest hydrocarbon potential in the
Western Desert of Egypt.
The Concession is operated by North Petroleum, a subsidiary of
China ZhenHua Oil Co. Ltd, a Chinese state owned oil company. It
consists of two development licences covering approximately 62
km(2) awarded in July 2011 and February 2014 as shown in the table
below.
Development Awarded Expiry Area (km(2) Status
)
Safwa 12 July 12 July 44 Producing
2011 2031*
North Dabaa 18 February 18 February 18 Gas / condensate
2014 2034* discovery
*With a 5 year option to extend for a further 5 years.
There are currently six wells on production. Drilling activities
for 2016 will be reviewed with partners in the Concession in
forthcoming months.
Rationale for the Acquisition
Independent Resources has been actively appraising a number of
acquisition opportunities of producing assets in Egypt since 2013.
The Acquisition will provide Nostra Terra and Independent
Resources, through JVCO, access to a future production revenue
stream and operational cashflows that can be recycled into field
development or used for other purposes by the Joint Venture.
The Directors of Nostra Terra and Independent Resources believe
that the Acquisition offers Nostra Terra and Independent Resources
through JVCO the opportunity to buy production on attractive
commercial terms. Management's technical evaluation suggests that
there is significant potential development upside in the Concession
reinforcing the strategy of acquiring stakes in producing assets
with the potential to deliver good shareholder returns through
field management and development.
Egypt is a well-established hydrocarbon province with a
well-managed regulatory structure with the Egyptian General
Petroleum company ("EGPC") as the primary regulator and good
commercial terms on offer for concession holders.
The revenue sharing arrangements for the Concession are governed
by a profit sharing agreement with EGPC. The cost oil and gas
percentage is 25 per cent of revenues and 20 per cent of the
remaining oil and gas revenue is allocated to the account of the
contractor consortium as profit oil. Operating costs can be
recovered in the period while drilling and capital expenditure
costs are recovered over a five year period.
Onshore licenses in the Western Desert offer the potential for
relatively cheap development drilling with short pay back periods.
At 30 June 2015, there was an unrecovered historical working
interest cost pool of US$27million on the concession.
Nostra Terra and Independent Resources through JVCO look forward
to working with their partners in the Concession and EGPC to drive
further efficiencies while actively developing the field in an
economically justified way.
In conjunction with Independent Resources, we continue through
JVCO to appraise a number of other opportunities in Egypt and
Tunisia, our countries of focus.
Financial information
Transglobe GOS is a single asset company whose sole operation
relates to its interest in the Concession.
It reported revenues of circa US$11.0million and profit before
tax and impairment charge of $1.1m respectively in the 12 month
period to 31 December 2014. It reported a loss after tax after an
impairment charge of US$15.5 million. At 31 December 2014,
Transglobe GOS had gross assets of US$10.6million.
Timing of completion
The Acquisition is expected to complete in October 2015.
Completion is subject to the satisfaction of certain conditions
precedent including release of a third party charge over Transglobe
GOS and completion of final due diligence.
Matt Lofgran, CEO of Nostra Terra Oil & Gas, commented:
"Nostra Terra is entering a new phase of growth and we're
excited to be expanding into Egypt in an area of prolific
production. Our focus remains on acquiring existing producing
assets that can be acquired with leverage, with further upside
potential via exploration.
With this first acquisition outside of the USA for Nostra Terra,
our net production will treble as well as seeing a significant
increase in revenue. This is the beginning of adding much larger
scale in our operations."
Alden McCall, Chief Operating Officer of Nostra Terra, has
reviewed this announcement for the purposes of the current Guidance
Note for Mining, Oil and Gas Companies issued by the London Stock
Exchange in June 2009. Mr McCall is a Certified Petroleum Geologist
and is a member of the American Association of Petroleum
Geologists, the Society of Petroleum Engineers, the Oklahoma
Geological Society, the Fort Worth Geological Society and the
Houston Geological Society.
For further information, visit www.ntog.co.uk or contact:
Nostra Terra Oil and Gas Company plc
Matt Lofgran, CEO
mlofgran@ntog.co.uk Telephone: +1 480-993-8933
Sanlam Securities UK Limited (Nominated Adviser &
Broker)
Lindsay Mair/James Thomas Telephone: +44 (0)20 7628 2200
Walbrook PR Ltd (Media Relations)
Gary Middleton/Nick Rome Telephone: +44 (0)20 7933 8797
This information is provided by RNS
The company news service from the London Stock Exchange
END
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