Mosman Oil and Gas signs SPA to acquire NZ producing oil and gas assets
Mosman Oil and Gas Limited (AIM: MSMN) the New Zealand (“NZ”) and Australia focussed oil exploration and development company, has executed a conditional sale and purchase agreement (“SPA”) to acquire onshore NZ producing oil and gas assets for NZ$10 million (approximately £4.2 million) (the “Acquisition” or the “Project”).
Mosman has also entered into a participation agreement (“STEP Agreement”) with WRDLS Pty Ltd (“WRDLS”). WRDLS is a private company with resource and energy sector experienced personnel, including Dr Ray Shaw. Dr Shaw has more than 30 years’ experience, including former Director, MD and Chairman Roles of resource companies listed on the Australian Securities Exchange Ltd. (“ASX”). WRDLS has agreed to acquire at least 30% of the Project.
Mosman’s intention is to own at least 40% and no more than 70% of the Project and is actively considering further offers from potential JV partners.
The Acquisition remains subject to a number of matters including financing.
The Project assets include fully operational and established oil and gas processing facilities, equipment,permits, excellent infrastructure, assignment of key employee contracts and the assignment of relevant commercial contracts including oil and gas sales contracts.
It currently produces oil, condensate, gas, LPG and electricity, which deliver several revenue streams.
The facilities were the subject to a major refurbishment in 2014 and since restart in October 2014 have been producing an average 603 boepd * which would generate annual revenue of approximately NZ$8 million based on current production rates, oil price and exchange rates.
The Project will be renamed the South Taranaki Energy Project (“STEP”). It will be operated under a joint operating agreement (“JOA”) and Mosman will be the operator. The assets being acquired include the Rimu Production Station and two petroleum mining permits (“PMP”). The Project also includes:
o 2P reserves of 1.9 Bcf gas and 1.4 MMbbl oil*
o 2C resources of 13.7 Bcf gas and 4.1 MMbbl oil*
o Prospective resources estimated at 179 Bcf and 166 MMbls*
Historically the Project facility has produced over 10 Bcf (10.9 PJ) gas and 1.58 MMbbl oil*
Mosman has identified 12 low cost projects that could potentially significantly increase production at an estimated cost of NZ$ 2.6 million. None of these projects require drilling of new wells (which will be considered in due course).
Total consideration of NZ$10 million (approximately £4.2 million) to be paid in two tranches, the first tranche of NZ$7 million is payable upon completion of the Acquisition and the second tranche of NZ$3million six months following completion. A 5% deposit was paid by Mosman upon executing the SPA.
Mosman’s total contribution towards the consideration for the Acquisition is subject to final percentage ownership. Based on 70% ownership, it would be NZ$7 million (approximately £2.9 million),the first tranche being NZ$4.9m (approximately £2.1m) and the second tranche being NZ$2.1m (approximately £0.9m). Mosman’s first tranche of consideration will be reduced by the deposit of NZ$0.5M (approximately £0.2m), which deposit has been paid by Mosman in full.
Mosman intends to finance its share of the Acquisition through a combination of existing cash, sale of a royalty on future production, debt, equity, and convertible securities.
The SPA remains conditional upon a number of conditions precedent including: Mosman and its JV partners providing reasonable assurance of its financial capability to pay the total consideration due for the Project assets on or before 30 September 2015; and the granting of certain approvals from the NZ Government before settlement.
Mosman’s aggregate liability under the SPA is limited to NZ$7.5 million, for example should a JV party default on its obligations to Mosman after 30 September.
*Represents numbers supplied by Origin that have been subject to due diligence by Mosman. Prepared to be consistent with the Society of Petroleum Engineers definitions as set out in Appendix 2
The Chairman of Mosman, John W Barr, said:
“We are delighted to have signed the SPA and the STEP agreement on a deal that the Board believes will be transformational for Mosman. Numerous opportunities to increase production in the short term have been identified and there is significant upside in development of the Manutahi oil field that originally had 30 million barrels of oil in place. *
Read Full Release: SPA signed to acquire NZ producing oil and gas assets
Source: Mosman Oil & Gas Limited