22 Feb 2010 07:30
22 February 2010
Sirius Petroleum plc
("Sirius" or "the Company")
Acquisition of Marginal Field Interest and Joint Operating Agreement
Transaction categorised as a Reverse
Sirius requests suspension of trading in shares pending circular
Signing of Agreement
Sirius (AIM:SRSP) is pleased to announce that it has entered into an acquisition and joint operating agreement (the "Agreement") with Del Sigma Petroleum Limited ("Del Sigma") for development of the Ke marginal field which has aggregate recoverable hydrocarbon reserves estimated to be in excess of 25 mmbbls (2P reserves) andis located in Oil Mining Lease 55 ("OML 55") in Nigeria (the "Ke Asset" and, together with the Agreement, the "Transaction"). Completion of this Agreement will be conditional on inter alia shareholder approval and approval from Nigeria's Department of Petroleum Resources ("DPR").
Under the terms of the Agreement, Sirius is entitled to a direct 40 per cent interest in the Ke Asset and an application will be made for this interest to be registered with the DPR. Sirius will jointly operate the Ke Asset with Del Sigma, and fund 100 per cent of the development costs. Upon production of oil, Sirius will receive a net preferential cash flow of 78 per cent from the production revenues until full recovery of its investment following which its cash receipts will revert to 40 per cent to match its underlying economic interest in the field pursuant to the Agreement.
There is no Farm-in consideration payable in relation to the Transaction. Del Sigma have incurred substantial historical sunk costs on the Ke Asset and, as part of the Transaction, Sirius has agreed to make initial payments to Del Sigma amounting to US$2 million which will be paid as to US$500,000 on the signing of the Agreement, US$500,000 following a successful visit by the DPR to Sirius's operations and US$1 million within 5 days of the DPR's final approval of the transfer to Sirius of the 40 per cent interest in the Ke Asset. Sirius is entitled to recover these initial payments as part of the recovery of the funding costs of developing the Ke Asset.
The transaction is categorised as a reverse takeover under the AIM Rules for Companies ("AIM Rules") and so requires shareholder approval. Sirius is in the process of preparing an admission document and circular (the "Admission Document") to its shareholders pursuant to the AIM Rules, which will contain full details of the proposed Transaction including a Competent Person's Report which will be prepared in respect of the Ke Asset, together with a Notice of General Meeting and these will be posted to shareholders as soon as possible.
In the meantime, as required by the AIM Rules, the Company has requested that its shares be suspended from trading with restoration of trading due on publication of the Admission Document. Following completion of the Transaction, the Company will no longer be an investing company for the purposes of the AIM Rules and will be an operating oil development company working to bring the Ke Asset into production as soon as possible.
The Ke Asset
The Ke Asset was originally developed as a resource by Chevron Nigeria who retain a small royalty interest over any production income from the Ke Asset. The Ke Asset was awarded to indigenous Nigerian company Del Sigma in the DPR's marginal field bid round of 2003. The Ke Asset is situated in swamp water in the southern part of the Niger Delta approximately 5km from the Gulf of Guinea. There are analogous fields throughout the basin, with production from Shell in the same OML 55, about 20 km to the east of the Ke Asset.
The Ke field was discovered in 1965, and the (2P) recoverable hydrocarbon reserve is estimated to be in excess of 18.7 mmbbls in the Ke-1 / Ke South area with an additional (2P) estimated reserve of in excess of 7.1 mmbbls in a separate fault in the KeNorth / Ke North-East area, full details will be provided in the Admission Document. As the Ke Asset has not yet been developed into production there are currently no profits attributable to it.
Del Sigma
Del Sigma is a Nigerian incorporated company that has contracted and provided technical services for Shell Petroleum Development Company (the Nigerian subsidiary of Shell), Total Nigeria, Chevron Nigeria, and for Elf Petroleum Nigeria. The technical services provided included maintenance services for the entire ELF OML 58 oil & gas production facilities as well as Engineering Design Services for Nigeria LNG Ltd. The Managing Director and principal shareholder of Del Sigma, Dr Sokeiprim Amachree, graduated with a B.Eng in Mechanical Engineering from Ahmadu Bello University, and obtained an M.Sc in Industrial Engineering and Production Management from the Cranfield Institute of Technology (now Cranfield University) and PhD in Engineering Economics and Planning from Cardiff University. Prior to forming Del Sigma to work as an independent Nigerian petroleum producer, he worked as Production Engineer for Elf Petroleum Nigeria Limited, where he was Production Engineer in charge of the Elf Obagi field, which produced 60,000 barrels of oil per day.
Dr. Amachree is the inventor of the Community Oriented Production Strategy (COPS) Model - a Strategy for Peaceful & Hitch-Free Operation for Oil & Gas Fields in the Niger Delta in which the Host Communities are made to participate as Stakeholders in the business.
Commenting, Babatunde Agboola of Sirius Petroleum, said: "The proposed acquisition of the Ke Asset is in line with our strategy to acquire marginal field oil and gas assets in Nigeria. Our long term objective is to build a group of assets in the oil and gas sector which can deliver significant value to shareholders."
www.siriuspetroleum.com
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