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Nigeria: Sirius Petroleum acquires 75 percent shareholding in Precision Energy
04 Dec 2018
AIM-listed Sirius Petroleum, the Nigeria-focused oil and gas development and production company, has entered into a conditional sale and purchase agreement with Precision Energy Group ('PEG') to acquire a 75% shareholding in Precision Energy Tetra 109, 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 from Tetrarch Holdings.
- Tetrarch is an 80% shareholder in Tetra Energy Services, which wholly owns Tetra Petroleum Oilfield Services ('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:
- 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.
- 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.'
Source: Sirius Petroleum