New Stratus Acquires Repsol’s Ecuadorian Assets
TSX-V-listed New Stratus Energy Inc. has entered into a Letter of Intent (LoI) with affiliates of international energy major Repsol SA to acquire certain upstream and midstream assets in Ecuador. The assets acquired include an indirect 35% operated interest in Blocks 16 and 67, and an indirect 29.66% participating interest in Oleoducto de Crudos Pesados Ecuador SA (OCP), which owns and operates the OCP pipeline.
Under the terms of the LoI, New Stratus will acquire the assets for an initial cash consideration of US$5.0 million, payable in two equal installments. New Stratus will also make additional contingent payments up to US$12 million, subject to certain conditions, including the extension of the term of the service contracts, average Brent price during 2021 and 2022, the actual collection of the “carry forward” generated under the service contracts, and a percentage of the dividends or distributions paid by OCP’s parent company above a certain amount.
Blocks 16 and 67 are located in the Oriente basin in Orellana Province, and contain 13 fields along with 256 wells. The blocks have current average daily production of 6,200 barrels of oil equivalent per day (boe/d), net to the acquired 35% interest, with their license expiring in December 2022.
The OCP pipeline is Ecuador’s second major pipeline with a capacity of 450,000 barrels of oil per day (bbl/d), and transports approximately 30% of the country’s oil. The pipeline features a maritime terminal with both onshore and offshore delivery systems. In addition, OCP owns 3.75 million barrels (MMbbls) of oil storage capacity
“This transaction is part of the corporation’s strategy of consolidating its presence in the Sub-Andean geological basins targeting projects with existing production and exploratory potential. Featuring no upfront capital costs and stable dividend income from the pipeline assets, the unique structure of this acquisition has the potential to generate substantial value for our shareholders,” said Jose Francisco Arata, Chairman & CEO of New Stratus.
“After the completion of this acquisition, New Stratus will have access to and operate assets with production of approximately 18,000 bbl/d,” he added.
Calgary-based New Stratus Energy is focused on the acquisition of Latin American oil & gas exploration and production assets, and currently holds a 100% working interest in the VMM-18 E&P Contract in the Middle Magdalena basin of Colombia.
Laurentian Bank Securities and Horizon Capital are serving as financial advisors to New Stratus on the transaction.
The transaction is subject to customary closing conditions, including regulatory approvals from TSX-V, the Ecuadorian Ministry of Energy & Non-Renewable Resources, and the Superintendencia de Control del Poder de Mercado (SCPM), Ecuador’s antitrust authority.