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Talos President and Chief Executive Officer Timothy S. Duncan commented, "The recent CNH approvals have provided Talos and its partners with the flexibility to continue optimizing the potential of Block 7. The Consortium has significantly over-delivered on its commitments under the production sharing contract, and these approvals will give us the opportunity to continue to successfully develop the country's resources. We are excited about the additional potential of these prospects, all of which could be incremental to our world-class Zama discovery, the first by the private sector in Mexico's history. Finally, we believe these approvals, in combination with the significant increase in industry activity, are yet another indicator of the tremendous potential of the basin in the future."
Because the Consortium's Zama asset has already been discovered and appraised, it does not require any extension from the CNH in order to proceed to Final Investment Decision ("FID") and thereafter to development. After rapidly completing the Zama appraisal program safely and under budget, the Consortium is continuing its Zama unitization discussions with Petróleos Mexicanos ("Pemex") while simultaneously moving forward with its Front-End Engineering and Design ("FEED") work in anticipation of a 2020 FID milestone.
With thanks to Whiskey in the Jar , poster.
This may explain the premium ,if any, for the deal.
HOUSTON, Sept. 11, 2019 /PRNewswire/ -- Talos Energy Inc. ("Talos" or the "Company") (NYSE: TALO) today announced that it has received a two-year contract term extension as well as regulatory approvals for additional exploration activities on Block 7, located in the offshore portion of Mexico's prolific Sureste Basin. Talos is the operator of Block 7 in a consortium (the "Consortium") with its partners Sierra Oil & Gas, a Wintershall DEA company, and Premier Oil plc.
On September 4, 2019, the National Hydrocarbons Commission of Mexico ("CNH") granted a two-year term extension under the Consortium's production sharing contract for offshore Mexico Block 7, the first such extension granted to a private company in offshore Mexico. On September 9, 2019, the CNH approved the Consortium's modified exploration plan for Block 7. The extended contract term in combination with the expanded plan allows the Consortium to evaluate additional exploration prospects on the block in the future following the successful appraisal of the globally-recognized Zama discovery that was completed earlier this year.
The Consortium has identified multiple potential exploration targets on Block 7, including the Xlapak and Pok-A-Tok prospects, among others, with typical gross unrisked resources ranges between 75 – 150 million barrels of oil equivalent ("MMBoe") each. The prospects are amplitude-supported oil prospects targeting similarly-aged sands as those seen in the drilling campaign related to the Zama discovery and subsequent appraisal. The additional identified inventory is within close proximity of Zama, potentially allowing for significant development cost synergies if successful. Due to the recent high level of activity on Block 7, the Consortium has already fulfilled the minimum work commitments that would otherwise be required for extension, and any future exploration activities would benefit from cost recovery mechanisms under the Block 7 contract terms. As a result, the modified exploration plan and related approvals provide the Consortium with significant optionality for future evaluation of additional, material exploration prospects within the block. The Block 7 production sharing contract requires the Consortium to relinquish approximately half the acreage on Block 7 upon obtaining the two-year term extension, but the Block 7 modified exploration plan, approved by CNH, retains the acreage covering all of the Consortium's identified potential exploration targets.
The shale industry is making huge losses , their business model does work as evidenced by the huge losses that are mounting up.
Capitol markets no longer want to invest and the last raise from markets by a company was nearly 2 years ago.
Companies are filing for bankrupties at an alarming rate,.
Mid tier and smaller shale oiliers are having to or being forced by investors to cut back on capex, they are now pumping from their stock of wells they have on their inventory they pre drilled.
The next quarter will see significant rise in debt with oil wti at $55, once they use up the their pre drilled inventory.
All but a few are cash positive and they are only just positive at that.
The bubble is go9ing to burst and we are going to see carnage in the shale sector, even the majors are making a loss in shale, but they are able to ride out the loss via other income.
No company wants to buy distressed shalers as they themselves are under stress.
The current oil production is not reflecting the whats coming and it will be made worse by poo being held at $55- $60 pbo.
Heads in the sand at the moment , but investors are now realising their folly of spending trillions for the last 10 years.
God forbid, but should an environment event occur, eg, contamination of ater, eart tremors etc then the whole sector will be in danger of facing severe drilling restrictions.
I would not touch shale companies with a barge pole.
15 - 20% farmin($400m - $500m + proceeds of Zama sale !
Could be Plan B .
Sounded like they had a buyer(s) for Zama and the equity partner was talked about when they were trying to purchase the North sea assets. Large investments funds have been known to invest directly into oil projects.
I have always felt that Zama sale money would provide a backstop for any shortfall to Sealion funding.
They have only sunk $60m in Zama so far , which is a serious return on expenditure , with 200mbo share of the field.
A material reduction in their debt would bring them very close to their peer group regards debt leves and covanent ratios and open up lending avenues. They are already talking to their current lenders about the debt, well ahead of their renogotiation in 2021.
Sealion doubles their production profile from first oil. ( see slides in presentation)
The webcast is worth listening to and leaves no doubt that it is now a material event for Premier .
TD also stated that increased capex on Sealion is to increase production with more wells.
He also stated that they are formalising the farmout process, which started a month ago.
Expects Sealion funding outcome and Zama sale subject to offers,to be completed in the next 6 months.
This is the most they have talked about Sealion progress in a long time.
Must say, the Premier management team is quite impressive and much can be learnt by the RKH board from them.
Really worth listening to , webcast available later on in full.
Having taken the 2018 production figures as the base point for their valuation, we still get that for the rest of the year , plus the increased production since then and any production from the latest well. All revenue till 1st Jan 2020, that is what I make of it.
So we will still get full year revenue from the asset.
Why is the timeline for a result given as Q1 ?????
Does not make sense, going by ICSID guidelines on the maximum time allowed for deliberation to finish arbitration.
Re the Egypt deal, it may be that the gas pipeline plans finally pushed RKH to a point where returns were not going to keep covering G+A and in fact would drain what cash they have left to cover the cost for the pipeline.
Deal seems cheap , but the fact such a small company has bought the assets says a lot about the interest in the asset.
I remember days gone past where they provided extensive detail in the RNS, when drilling and operations were taking place.
We now get the barest minimum .
With FEED ready, and Funding application ready, expert independent reports completed, due dilgence for a farmin partner would be a doodle with everything to hand.
I personally thought it would be after the funding was done to extract more value from the project.
Robpug,it is a long as it currently stands that PMO would buyout RKH, but in 8 months to year their debt rating will be comparable to its peers in the sector.
This feels more like a farmin has been agreed and there is a cash element to it,imo.
Can't see how it would take OM arbitration till Q1 2020 , when ICSID rules say maximum 180 days maximum from last submission, which was March / April 2019.
Suspect more news will follow to justify this selling of assets.Sam M, uses the word Catalysts, not catalyst in his statement?
Last filing 4th March
120 days max to hearing decision means early July latest , take out 2-3 weeks for the last appeal and we should be getting to the 120 day mark by end this month or early August. after the 120 days, should they require more time, then a further 60 days extenstion will be allowed. There will be official news release to say that.
PMO by year end will have a independent assessment of the Zama reserves.
In addition Talos and Pemex will have the unitsation of the the field resolved according to the operators timeline.
This asset can be sold or farmed down or kept , leaving PMO with some very material options to either reduce debt a bit or significanly below x2 EBITA .
They could also have agreed farmin terms with a partner and mitigated their risk and included that in the ECA application , there is no reason they could not do that with a ECA country partner to again increase the chance of another foreign ECA taking on the loan .
Great find Mogger by the way. You are truly the ferret king.
That must be part of the experts reports PMO submitting, I'm sure there are many more, re housing, transport,rota's. etc.
Application and well result due , hopefully both this week, cheap as chips pending those events.