13th Jun 2016 10:37
LONDON (Alliance News) - Independent Oil & Gas PLC Monday said it has struck a deal to acquire four licenses within the Southern North Sea that are thought to contain over 320.00 billion cubic feet of gas, and lie just east to the Blythe field.
Independent Oil signed a sale and purchase agreement last Friday with Versus Petroleum Ltd to conditionally acquire one of its subsidiaries, Oyster Petroleum Ltd.
The deal is reliant on Versus transferring the four licenses to Oyster and in return, Independent Oil will pay an initial consideration of GBP1.0 million, funded through the company's existing loan facilities, followed by a further payment of GBP750,000 nine months after the deal is completed.
Independent Oil may be required to pay a further GBP3.3 million if it reaches certain milestones in the future, which if paid would push the total aggregate amount up to GBP5.0 million.
Oyster, and in turn Independent Oil, will hold a 100% interest in the four blocks that are covered by the four licenses; block 49/21a within licence P039, block 49/21d within licence P2122, block 48/25b within licence P130, and block 49/21c within licence P1915.
The licenses will be collectively known as the Vulcan Satellites and house the Vulcan East, Vulcan North West and Vulcan South fields.
Independent Oil is in the process of acquiring the 50% stake in the nearby Blythe field from Alpha Petroleum Resources Ltd and is hoping to then build a regional hub, with the satellite prospects set to be tied back to Blythe.
Oyster also has around USD25.6 million in UK pre-trading expenditure which can reduce the future amount of tax payable, said Independent Oil. However, the Vulcan East area homes a suspended well that needs to be decommissioned, which is estimated to need around GBP3.0 million to complete.
The assets have 2C recoverable resources of 320.70 billion cubic feet of gas, equal to 53.5 million barrels of oil equivalent and the cost of the deal averages out at only 22.0 cents per barrel.
Breaking that down, Vulcan East holds 77.4 billion cubic feet, Vulcan North West has 131.3 billion cubic feet and Vulcan South homes the remaining 112.0 billion cubic feet.
"Once all announced transactions have completed, we should have more than 100 million barrels of oil equivalent of low risk resources in our portfolio. This will be approximately two thirds gas and one third oil which provides an excellent springboard for us to become a significant development and production company," said Chief Executive Mark Routh.
Importantly, Independent Oil said the prospects do not require any further appraisal work and lie 35 to 40 kilometres away from the Blythe field, which Independent Oil is in the process of acquiring.
Independent Oil said it will begin preparing field development plans once it has signed offtake agreements and sourced an export route for its gas hubs.
London Oil & Gas Ltd, which has previously provided funding to Independent Oil, said it is in discussions about providing development funding for Independent Oil's portfolio.
Independent Oil shares were trading up 4.9% to 18.10 pence per share on Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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