MX Oil invests in OML 113 offshore Nigeria

MX Oil invests in OML 113 offshore Nigeria

MX Oil plc (“MX Oil” or the “Company”) Investment in near term production oil and gas asset, placing and issue of new equity

MX Oil plc, the AIM quoted oil and gas investment company, is pleased to announce it has agreed to invest in an indirect, non-operated, 5% revenue interest in the OML 113 licence, offshore Nigeria, which includes the Aje Field (“Aje”), a substantial development stage project with proven, flow tested discoveries where production is expected by January 2016. This investment is in line with the Company’s strategy to acquire high impact near term production assets in proven oil and gas jurisdictions to build a cash generative platform.

In addition, the Company announces the issue of 133,333,333 new ordinary shares via a placing at 4.5p per share to raise £6 million before expenses to provide additional working capital and funding for future capital expenditure and investment.

Investment highlights

  1. Aje Field

• Aje is an oil, condensate and liquids-rich gas discovery on licence OML 113 which has been appraised and is anticipated to commence production by January 2016 – located offshore Nigeria, a prolific hydrocarbon jurisdiction

• Initial targeted peak production of 11,000 bopd rising to 19,000 bopd in Phase 2

• Four wells have previously been drilled on Aje – two have been production flow tested

• Seven prospects identified from historic seismic data as key exploration targets to drive reserves on OML 113 in the post-rift, middle cretaceous section, with two additional prospects in the syn-rift

• Potential for OGO discovery structure on contiguous block OPL 310, which has P50 gross recoverable resources estimated at 774mmboe, to extend into OML 113 – based on historic seismic data

Near term milestones in Q3 2015 include:
o Drilling of a new oil production well, Aje 5, which is due to be announced in the near term
o Re-entry into Aje 4 which is scheduled for the end of September
o The results of the interpretation of new 3-D seismic data to determine the possible extension of the OGO discovery over the OML 113 acreage which has the potential to have a material impact on OML 113’s reserve numbers
• Two additional producers will be drilled in Phase 2, targeting the same proven oil reservoir as the Phase 1 wells, which are expected to extend the production plateau of the initial oil development. Phase 2 will target an increase in production at Aje to 19,000 bopd
• Phase 3 of the development, which will target the development of the Turonian gas condensate reservoir, is currently in the planning stage

Assessed economics of Aje Field
• Low breakeven oil price of US$31 at 0% discount rate or US$45 using 10% discount rate
• Interest valued at US$55.1 million NPV (0) or US$31.5 million NPV (10) based on a recently completed CPR assuming US$70 oil price
• Short lead time to first oil production and cash inflows expected by January 2016
• US$11.5 million of additional funds budgeted to be spent by MX Oil to cover the capital expenditure to get to first oil. Phase 2 and Phase 3 will require additional investment,much of which is anticipated to come from revenue from oil sales Transaction

The interest in OML 113 is currently held by Jacka Resources Limited, (“Jacka”), a resources company listed on the ASX, through wholly owned subsidiaries. Jacka acquired this for $16 million in 2011 and has subsequently invested a further AU$11 million into the project to date by way of loans to its asset holding subsidiary. This debt will be assigned to MX Oil for US$3 million to be satisfied by the issue of 43,380,325 new ordinary shares in MX Oil at the placing price of 4.5p per share (the “Investment Shares”) and the assignment of rights to invest into the asset holding company to fund the development to first oil. This right was acquired from Jacka, by Cornhill Asset Management (“Cornhill”) and an
associated investor.

In consideration for the acquisition of this right to fund the project and therefore the benefit from any future cash flows to MX Oil form OML 113, the Company will make certain conditional payments to Cornhill. The first payment of $800,000 will return the funds invested by Cornhill and an associated investor into Jacka and is conditional on the spudding of the next production well in Aje. A success fee of $1 million is due to Cornhill
upon the commercial production of hydrocarbons from the Aje field. These payments,will comprise a related party transaction by virtue of Andrew Frangos being a director of Cornhill and the Company.

MX Oil’s Chief Executive Officer Stefan Olivier said, “We are highly encouraged by the reaction this acquisition has received from both existing and new investors, and we are pleased to now have institutions on our register, alongside our historic and supportive retail
shareholder base. Aje, as an investment, ticks all the boxes: compelling economics in the current low oil price environment; a defined development plan in place targeting near term production; considerable exploration upside; located in a prolific hydrocarbon jurisdiction close to existing infrastructure; and acquired at a highly attractive price. To have been able to secure this acquisition on these terms is testament to the MX Oil management’s ability to source and secure interests in assets with company-making potential. We are looking forward to announcing a spud date for our Aje production well in the near term, and are excited by the prospect of bringing this field into production with our new partners and beginning to realise Aje’s excellent potential.

“This is a game-changing acquisition for MX Oil. It accelerates our transformation into a highly cash generative oil and gas investment company, and it provides a platform from which to fund the development of the conventional onshore concessions we are looking to secure in Mexico as part of the on-going Bid Round 1 licensing round. In Mexico, we have already been granted access to the data room and we are currently carrying out due diligence alongside our local partner Geo on a number of blocks. Concessions are due to be awarded in Mexico in December this year and we remain confident of winning two or more oil producing blocks. Alongside expected production in Nigeria by January 2016, the next six months promise a great deal of newsflow which should excite our shareholders, as we look to create a leading oil and gas company.”

More: Full Announcement

Source: MX Oil

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