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(Alliance News) - Coro Energy PLC will sell its entire Italian gas portfolio to Zenith Energy Ltd for GBP3.9 million, the two London-listed companies announced on Tuesday.
Shares in Coro were down 6.8% at 1.94 pence in London in morning trading, while Zenith's shares were up 3.1% at 2.32p.
In its September 12 interim results, Coro had said it was committed to growing in south east Asia and had made divestment of its non-core Italian operations a priority.
The initial consideration for the Italian natural gas production and exploration portfolio is GBP400,000, payable by Zenith to Coro in the form of 6.7 million new Zenith shares priced at 6.0 pence each.
Then, provided the portfolio achieves average daily production of 100,000 standard cubic metres per day on average for four successive months, a up to GBP3.5 million in Zenith shares will be due to Coro. This production figure represents approximately 590 barrels of oil equivalent per day.
Coro Chief Executive James Menzies said: "As the company continues to focus on the investment opportunities in south east Asia, the disposal of our Italian portfolio removes non-core assets and streamlines our geographic focus. The Italian portfolio requires significant management time and capital expenditure to sustain its production and in-line with our stated strategy, we believe that focusing our resources on the rapidly growing south east Asian market will provide greater opportunity to maximise shareholder value."
Coro's portfolio in Italy consists of 100% working interests in four producing natural gas concessions - Sillaro, Rapagnano, Casa Tiberi and Bezzecca - as well as one which is development ready and two exploration concessions. These assets generated revenue of EUR1.5 million in the first half of 2019 at an average cumulative production rate of 40,000 standard cubic metres per day.
Following "a series of targeted interventions" over the next six to nine months, Zenith expects production from the portfolio to reach 113,000 standard cubic metres per day.
The deal will also make Zenith ones of Italy's largest natural gas production operators with total cumulative production as 55,000 standard cubic metres per day. It is also set to ore than quadruple Zenith's gross production revenue, with expected yearly gross revenue to be around EUR3.6 million.
Zenith CEO Andrea Cattaneo said: "There are a number of opportunities to increase production from current levels in the acquired assets through targeted relatively low-risk well interventions, also present in our existing Italian portfolio. Our newly enhanced technical team and financial resources will enable Zenith to apply renewed focus on its Italian portfolio."
Separately, Coro announced it is seeking another six-month extension to the long-stop date on its attempted acquisition of a 43% interest in the Bulu production sharing contract offshore East Java.
The Bulu acquisition was conditional upon a joint venture partner pre-emption waiver and regulatory government approvals being obtained by Monday this week.
While the waiver was received, government approvals have been delayed and so the acquisition did not complete in time.
As a result, Coro is negotiating another six-month long-stop date extension to give enough time for the approvals to be received. All parties involved in the Bulu deal are planning to enter into the extension, it said.
By Anna Farley; annafarley@alliancenews.com
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