PetroNeft Raises Stake in Western Siberian License 67
AIM-listed PetroNeft Resources Plc has signed a Heads of Terms (HoT) with Russian E&P company Belgrave Naftogas BV (formerly Arawak Energy Russia BV) to increase its interest in Licence 67 in Western Siberia from 50% to 90%, for a total consideration of US$2.9 million.
Under the terms of the HoT, PetroNeft will acquire an additional 40% interest in License 67 in exchange for the issuance of 80,000,000 PetroNeft ordinary shares (valued at US$1.2 million), plus an additional cash payment of US$1.7 million. The cash component will be financed through a 3-year loan from Belgrave Naftogas at an interest rate of 8% above Bank of England base rate. In addition, Belgrave Naftogas will be carried by PetroNeft for its 10% share of license costs up to repayment of the loan. The seller will also have the right to nominate a director to the PetroNeft Board.
License 67 covers an area of 2,447 sq. km in a highly prospective part of the Tomsk region of Western Siberia, and is surrounded by significant adjacent producing fields. The license contains the Cheremshanskoye and Ledovoye fields, and includes two 3D seismic surveys totaling 157 sq. km. The companies have drilled three wells till date, two on the Cheremshanskoye field and one on Ledovoye, with all the wells encountering oil. The last well was C-4 which was drilled in 2018 and tested up to 399 barrels of oil per day (bbls/d). Total C1+C2 reserves (approximately equivalent to 2P reserves) for the Cheremshanskoye field is estimated at 19.2 million barrels of oil (MMbbls) as of December 31st, 2019.
At the start of 2020, an extended test was carried out at C-4 well, resulting in the well flowing naturally up to 496 bbls/d and 1,200 bbls of oil being produced and sold competitively on the market. Currently, an all-season road is currently being built to link the C-4 well to existing road infrastructure, to ensure year-round production from Q1 this year. Further work program for the license includes finalizing and implementing a plan for the development of Cheremshanskoye and the further investigation of Ledovoye over the winter months.
“This potential acquisition is consistent with the Board and Management’s previously announced commitment of enhancing shareholder value through boosting production, reserves and revenue. As early as next month the asset is expected to transform from being an exploration to a producing asset. This agreement will add significant impetus to our plans to develop the Licence,” said David Sturt, CEO of PetroNeft.
“We will be working hard with Belgrave Naftogas to ensure that we close the acquisition during the first quarter this year,” he added.
Dutch-registered Belgrave Naftogas is engaged in exploration and production activities in Russia, and currently holds a 50% interest in the Sotchemyu-Talyu and North Israel fields in the Komi region. In early 2020, the company was acquired by Sarum Energy Ltd., a UK-based company whose majority shareholder is Alastair McBain, the former CEO of Arawak Energy Ltd.
The transaction is subject to customary closing conditions, and is expected to close in Q1-2021.