14th Apr 2014 11:28
LONDON (Alliance News) - San Leon Energy PLC Monday said it has decided not to continue with buying a majority stake in Turkey's Alpay Energi AS, instead focusing on shale gas production in Poland.
The oil and gas production company with operations in Europe and North America, said it determined that its capital would be better spent in Poland, particularly in the Baltic Basin where San Leon's Lewino-1G2 well shows great promise for shale gas production.
The company said the decision was also made after a new round of successful deals bringing in companies including Baker Hughes Inc and TransAtlantic Petroleum Ltd to drill for shale gas in the Polish region.
The original share purchase agreement was made in September 2013 and would have seen San Leon acquire 75% of Alpay Enerji AS from Server Fatih Alpay for USD4 million.
In September, Alpay Energji AS held a 100% participating interest in seven conventional oil and gas licences and had gross proved and probable gas reserves of 46.6 billion cubic feet.
San Leon said it had come to the decision after the longstop date requiring Turkish Government approval of the transfer of the Alpay licences to San Leon by March 31 expired. The devaluation of the Turkish Lira against the US Dollar since the signing of the agreement also affected the decision.
The company added that the production potential of one of the Turkish wells was hit by a significant amount of formation water in the well, and there had been a knock-on significant loss of customers at the existing gas plant due to the water issues.
San Leon said that it chosen not to extend the period allowed for the licence transfer which was to be completed before the deal went ahead, allowing the agreement to lapse.
The company said it will continue to evaluate Alpay's assets for specific opportunities on a case-by-case basis.
San Leon also said that significant progress has been made towards finalising commercial terms with Baker Hughes Poland Sp on the Siekierki gas field development in Poland and a joint press release is expected to be issued shortly.
In February, the companies signed an agreement to start gas production from four existing wells, namely Trzek-1, Trzek-2ZH and Trzek-3H on the Siekierki structure, and the nearby Krzesinki-1 well. Baker Hughes would provide funding in return for a certain portion of the profits generated from production until its investment has been fully recovered, at which point it will receive certain net profit interest from the wells.
In January, San Leon announced the results of a major fracking test in Poland, stating that its Lewino-1G2 well reached a sustained gas production rate of 45,000 to 60,000 standard cubic feet per day after six weeks of well clean-up.
At the time, the company said engineers estimate a potential rate from the site of 200,000 to 400,000 standard cubic feet per day of gas, based upon full clean-up of frac fluid.
San Leon shares were down 3.0% to 3.38 pence Monday.
By Tom McIvor; [email protected]; @TomMcIvor1
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