CERP.L Regulatory News (CERP)

19 March 2018

COLUMBUS ENERGY RESOURCES PLC

("Columbus" or the "Company")

Successful Renegotiation of BOLT transaction - Trinidad

Columbus, the oil and gas producer and explorer focused on onshore Trinidad with the ambition to grow in South America, provides the following update about the Beach Oilfield Limited ("BOLT") transaction and its aspirations for operations and exploration in the South West Peninsula of Trinidad ("SWP").

The Company has successfully restructured the BOLT transaction, on materially improved terms for the Company, and has entered into an Agreement for Lease with Singh's (Cedros) Estates Limited ("Singh Estates") to gain long term access to the South West Peninsula for oil and gas operations, including the Bonasse oilfield.

Leo Koot, Executive Chairman of Columbus, commented:

"Today's news is a major milestone for Columbus and further delivery of our strategy to build a core exploration, appraisal, development and potentially significant production hub in the South West Peninsula of Trinidad. We have successfully renegotiated the BOLT transaction on materially improved terms for the Company, we have entered into a new lease arrangement with the leaseholder, Singh Estates, and, most importantly, we have obtained 100% operational control over a large area (approximately 8,700 acres) in the South West Peninsula including mapped multiple prospects of 20-400 million barrels in place, which we intend on exploring, in addition to reactivating and maximising production from the Bonasse oilfield which is currently producing at a very low level. In line with our ongoing focus on capital discipline, the payments due under the renegotiated BOLT transaction and new lease arrangement are fully funded from existing cash resources and are included in the Company's 2018 Budget.

The changes to the over-riding royalty rates we have agreed, as well as the timing of their introduction and annual caps on those rates, means that a successful commercial development of the SWP following any exploration/appraisal success is now far more likely and will now be undertaken in a manner which works to the benefit of all interested stakeholders. Our fully funded 2018 work programme in the SWP includes commencing a well reactivation programme in Q2 2018 on the Bonasse field, alongside undertaking further analysis of the good quality 3D seismic and other data, with the first well potentially being drilled, subject to satisfactory technical analysis, in the first half of 2019.

I would like to thank BOLT and Singh Estates for their willingness to negotiate a deal that we believe offers the best chance for all parties to benefit from a revived and rejuvenated campaign on the SWP. We look forward to working with Singh Estates, the Ministry of Energy and Energy Industries and other stakeholders to fully explore and develop the SWP. This is a very exciting time for the Company and all involved and provides a unique opportunity to potentially deliver transformational growth of our business to the benefit of our shareholders and Trinidad & Tobago."

Background

In 2015, Columbus and its local subsidiary, Leni Trinidad Limited ("LTL"), entered into the initial agreement with BOLT for the purchase of the "deep rights" held by BOLT in the SWP (oil and gas that lay below 7,000 feet). This included LTL purchasing a 25% equity interest in BOLT at that time.

In January 2017, the relevant parties amended the terms of the BOLT transaction. It envisaged that LTL would acquire the remaining 75% of the shareholding in BOLT in return for: (i) a payment of US$50,000 to the shareholder of BOLT; (ii) Columbus making other payments to third parties of approximately US$134,000; and (iii) the adoption by Columbus of a loan held by BOLT of approximately US$1.1 million.

The rationale for acquiring BOLT was that BOLT was the lessee under a lease with Singh's (Cedros) Estates Limited (the "Existing Lease"). The Existing Lease provided BOLT with access to the petroleum underlying the leased lands on the SWP covering approximately 3,300 acres.

Renegotiation of BOLT transaction

Columbus is pleased to announce that it has renegotiated the BOLT transaction as follows:

1. Termination of the existing sale and purchase agreement in return for the following consideration:

a. Payment of up to US$450,000 to BOLT, upon the transfer of the Existing Lease to Columbus (including the rights to the Bonasse field) and the transfer of associated agreements for oil & gas operations on the SWP;

b. Columbus making a payment to Petrotrin of approximately US$80,000 to complete the purchase of a 27.5% interest in the Bonasse field;

c. Columbus relinquishing its 25% shareholding in BOLT;

d. BOLT relinquishing all rights under the Existing Lease;

e. Columbus acquiring access to all oil and gas rights on the SWP;

f. BOLT retaining the loan of approximately US$1.1 million;

g. Columbus paying deferred consideration to BOLT of: (i) US$500,000 upon the development of any field (other than the Bonasse Field) situated within the Existing Lease; and (ii) a royalty of 3% on net production from a development of the SWP licence (excluding the Bonasse Field). The royalty is payable on net production exceeding 10 million barrels of oil ("mmbbl") and capped at US$1.25 million per annum (NB. previous arrangements envisaged a royalty (or equity) of 7.5% payable from first production with no cap).

Columbus is pleased to note that by removing the need for Columbus to adopt the BOLT loan, the upfront consideration for the BOLT transaction, as payable to BOLT and Petrotrin in Q2 and Q3 2018, has fallen by approximately 60%. The deferred consideration is only payable on a material success case in due course.

The payments due to BOLT and Petrotrin are fully funded from existing cash resources and are included in the Company's 2018 Budget.

Singh Estates Lease

Simultaneous with the renegotiation of the BOLT transaction, Columbus is pleased to announce that it has signed an Agreement for Lease with Singh's (Cedros) Estates Limited (the "Future Lease").

The Agreement for Lease:

1. Ensures that Columbus has access to 100% of the SWP for oil and gas operations until January 2019;

2. From February 2019, grants Columbus the Future Lease for a period of 27 years, with Columbus holding 100% of the rights.

The consideration for the Agreement for Lease is Columbus paying Singh Estates TT$2.5m (approximately USD$375,000) in Q2 2018. The payments due to Singh Estates are fully funded from existing cash resources and are part of the Company's 2018 Budget.

The consideration for the grant of the Future Lease is as follows:

· Rental: US$70,000 per annum (escalated up, or down, depending on the prevailing WTI oil price)

· Royalty: Half-yearly stepped payments of up to 12.5% are payable on gross production, capped at US$2m/annum (with no royalty payments due for first two years of production, 10% payable for years 3-8 and 12.5% from year 9 onwards)

· Drilling Bonuses: TT$100,000 (circa US$15,000) upon the spud of each of the first three (3) deep wells.

Development Bonus: TT$200,000 (circa US$30,000) on approval of a Development Plan arising from a new discovery. The previous arrangements with Singh Estates, which included royalty payments of 12.5% from first production, with no cap on annual payments, could have seriously affected the commencement of any commercial development of the SWP by the Company.

The Future Lease has a minimum work obligation of three wells and/or workovers that involve deepening the well and is otherwise on industry standard terms and conditions, substantially similar to the Existing Lease.

The agreements with Singh Estates and BOLT, as referred to above, have been undertaken through a new Columbus wholly-owned Trinidad subsidiary company, Columbus Energy Bonasse Limited. Under the new arrangements, Columbus will not have any further ownership of BOLT and all dealings with BOLT will be on an arms-length contractual basis (eg. for payment of any deferred consideration and royalties).

Operations on the South West Peninsula and exploration potential

Columbus will take over operatorship of the Bonasse oilfield with the intent of commencing a well reactivation programme, planned for Q2 2018. At present, Bonasse is intermittently producing at around 10 barrels of oil per day but with Columbus taking over operatorship, Columbus is confident that 10 existing wells at Bonasse can be profitably rejuvenated at minimal capital expense from the Company's existing cash resources in a manner similar to that successfully adopted on the Goudron field.

The SWP, where Columbus already has minor production from the shallow Icacos oilfield, is significant since it is largely unexplored with regard to deep potential and is in close proximity to and geologically a part of the prolific East Venezuelan Basin. The only deep onshore well, FRM-1, drilled directionally in 2008 to a measured depth of 12,301 feet, found oil shows in the Lower Cruse and Lengua Formations at a 10,180 feet sub-sea true vertical depth. The regionally significant Herrera Sandstone formation was not reached in the FRM-1 well. The on-trend structures offshore at Soldado have yielded major oil fields, in excess of 200 million barrels, and it is Columbus's view that similar structures may lie onshore beneath the SWP.

The SWP was one of Columbus's principal targets in acquiring the Full Tensor Gravity ("FTG") gradiometry survey acquired by ARKeX Limited in 2015. The FTG data has been interpreted alongside a soil geochemistry survey and the existing well and seismic data which includes a 3D seismic survey over a large portion of the peninsula. The integrated interpretation work has shown the presence of a significant number of undrilled oil and gas leads and prospects within the SWP which will be further studied prior to a decision to drill.

The Bonasse oilfield, discovered in 1911 by the Greig-1 well, lies some 10 kilometres from Icacos and is delineated by a total of 16 wells drilled to depths of up to 2500 feet. The field currently has 10 wells available for reactivation. Production was re-started in 1997 but was temporarily suspended in mid-2016. The Company's subsidiary, LTL on behalf of BOLT, performed limited reactivation work on three Bonasse wells in June 2017 allowing intermittent production and sales to take place between June 2017 and January 2018. Oil production comes from sandstones of the Cruse Formation and the oil quality averages 23 degree API gravity. Columbus believes significantly greater potential exists for additional production through the application of proven technologies. Additional shallow drilling targets are also available within the field boundaries.

Columbus, through its interests in Icacos, its wholly owned Cedros leases and the Existing Lease/Future Lease, has approximately 8,700 acres under lease in the SWP within which to explore, as well as the existing producing assets that can support enhanced production activities, such as well recompletions and the drilling of new production wells.

In 2018, Columbus, as the 100% licence holder, plans to undertake further analysis of the integrated geoscience dataset which includes good quality 3D seismic data, well log data, full tensor gravity gradiometry and soil chemistry data as well as undertake further de-risking studies of the existing prospect mapping. The existing interpretation includes mapped multiple prospects of 20-400 million barrels in place and due to the fact wells can be drilled onshore, the costs per well will be significantly lower than equivalent depth wells offshore. It is anticipated that between 2-3 wells, targeting the shallower prospects, may be drilled on the licences initially at costs of around US$2-4 million per well, including wells targeting multiple stacked prospects, with the first well potentially being drilled, subject to satisfactory technical analysis, in the first half of 2019. The Company will look to fund this work programme from cash available from its growing production operations in Trinidad.

In summary, the SWP exploration opportunity can be progressed in a proven oil producing province with two small producing fields already in operation. Despite being in close proximity to the prolific East Venezuelan Basin, of which the SWP is geologically a part, this is a largely under-explored area where exploration wells may be drilled at a modest cost. In addition, any successful discovery/appraisal can be brought onto early production at a low cost due to the presence of existing Company operated oil production and sales capabilities and other locally available hydrocarbon infrastructure.

Now that the lease covering the Bonasse area has been secured for approximately 28 years, the Company plans to progress this opportunity over the entire SWP throughout 2018 and 2019 and is currently putting the necessary manpower and other resources in place to maximise the chance of success.

This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Qualified Person's statement:

The information contained in this document has been reviewed and approved by Stewart Ahmed, Managing Director (Trinidad) for Columbus Energy Resources plc. Mr Ahmed has a BSc in Mining and Petroleum Engineering and is a member of the Society of Petroleum Engineers. Mr Ahmed has over 32 years of relevant experience in the oil industry.

Contact Information

Notes to Editors:

Columbus Energy Resources Plc is an oil and gas producer and explorer focused on onshore Trinidad with the ambition to grow in South America. Initially focussed on maximising production from its core Goudron field asset, Columbus is cashflow positive and aims to create transformational growth by developing its exploration targets across its portfolio in the South West Peninsula ("SWP"), which lies in the extreme southwest of Trinidad and consists of stacked shallow and deep prospects, in a capital efficient and disciplined manner.

Columbus is guided by the following core values; safe and sustainable, stronger together, creative excellence, positive energy, totally trusted and personally responsible.

The Company is led by an experienced Board and senior management team with supportive shareholders and intends on leveraging its expertise and experience to build an attractive and diversified portfolio of assets across South America in order to build an oil production led South American exploration business. 

To find out more, visit www.columbus-erp.com or follow us on Twitter @Columbus_ERP.