PetroNeft announces completion of Licence 61 Farmout
PetroNeft (AIM: PTR) an oil & gas exploration and production company operating in the Tomsk Oblast, Russian Federation, announced the completion of the Licence 61 Farmout to Oil India Limited (“OIL”).
· All debt repaid
· Drilling to re-commence at Licence 61 this month as part of a fully funded exploration and development programme
· Introduces a strong industry partner seeking to build an oil and gas business and strategic position in Russia
· New chapter begins for a significantly strengthened PetroNeft
Following the granting of Russian Regulatory Approval on 30 June 2014 the transaction with Oil India Limited was completed on 3 July 2014. All debt due to Macquarie and Arawak has been repaid from the initial proceeds of US$35 million and the Company is now debt-free.
Under the terms of the Licence 61 Farmout, OIL has acquired a 50% interest in Licence 61 in return for a total Investment of up to US$ 85 million consisting of:
· US$35 million upfront cash payment.
– This enabled PetroNeft to repay in full its existing debt (the Macquarie Debt Facility and the Arawak Loan, totalling US$24.9 million) and have cash for working capital purposes;
· US$45 million of committed exploration and development expenditure on Licence 61 ,
· US$5 million performance bonus, contingent upon average production from the Sibkrayevskoye Field reaching 7,500 bopd within the next 5 years.
PetroNeft will remain as Operator of Licence 61, but OIL will have the right to second certain technical experts into PetroNeft’s Tomsk team.
The Licence 61 Farmout:
· Significantly strengthens PetroNeft financially and strategically,
· Fully addresses PetroNeft’s capital structure and long term investment requirements with all existing debt repaid, cash for working capital and investment and significant funds available to invest directly in Licence 61,
· Introduces a strong industry partner seeking to build an oil and gas business and strategic position in Russia,
· Positions PetroNeft to fully exploit the potential of its assets and create value for all Shareholders.
Evercore acted as Financial Adviser to PetroNeft for the Licence 61 Farmout and White & Case were the principal Legal Advisers.
Post Completion Activities
We expect to commence drilling at Tungolskoye later this month. The T-5 well will be the first horizontal well drilled by the Company and is expected to take approximately 60 days to drill. Assuming a successful result at T-5 we plan to bring the Tungolskoye into year-round production in 2015.
Following the T-5 well, up to five additional production wells will be drilled at Arbuzovskoye Pad 1 where drilling was suspended in February 2013. There are also plans in place to acquire 1,000 km of 2D seismic across the large Sibkrayevskoye oil field and Emtorskaya prospect commencing later in 2014. Current production has slowly declined to 2,100 bopd from existing wells.
Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented:
“I’m delighted that we have now completed the Licence 61 Farmout fully clearing all of our debt and leaving us with surplus cash and access to significant further funds to invest in growing the Company. We look forward to working closely with our new partners Oil India and to realising the full potential of this asset and to developing further opportunities together.
We have a planned multi-well drilling programme and will re-commence drilling at Licence 61 shortly. I look forward to updating shareholders with the results of this exciting programme over the coming months.”
Source: PetroNeft Resources plc,