(Alliance News) - PetroNeft Resources PLC on Friday announced it has signed a heads of terms agreement with Belgrave Naftogas BV to acquire an additional 40% stake in Licence 67 in the Tomsk Oblast region of Russia for USD2.9 million.
The Irish oil and gas exploration company operating in Russia owns a 50% stake in Licence 67, which it acquired in a state auction in 2009. It has increased its focus on the licence over the last 12 months due to the "significant potential" that it offers in terms of exploration and production, it said.
Shares in PetroNeft were up 36% at 0.85 pence in London on Friday.
PetroNeft said the transaction terms include the issue of 80 million PetroNeft shares to Belgrave Naftogas, which is part of the oil and gas focused Naftogaz Group in Ukraine, at a price of USD0.015 per share for USD1.2 million, representing an 8.7% shareholding.
The transaction also includes a cash consideration of USD1.7 million, which will be financed through a three-year loan from Belgrave Naftogas with an interest rate of 8 percentage points above the Bank of England base rate. Up to 50% of the loan can be converted by Belgrave Naftogas to PetroNeft shares at 2.0p per share during year one, 2.5p per share during year two, and 3.0p per share during year three.
PetroNeft said Belgrave Naftogas will have the right to nominate a director to its board. The company will carry Belgrave Naftogas for its 10% share of the joint venture costs up to the loan repayment, at which point Belgrave Naftogas will fund its own share of the costs, PetroNeft added.
"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. We will be working hard with Belgrave Naftogas to ensure that we close the acquisition during the first quarter this year," said Chief Executive David Sturt.
By Zoe Wickens; zoewickens@alliancenews.com
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