TransAtlantic provided the following update regarding its plans to acquire Thrace Basin Natural Gas, its current operations, and its plan to file financial statements for the quarter ended September 30, 2010.
Planned Acquisition of Thrace Basin Natural Gas
On November 8, 2010, we entered into an option agreement to acquire Thrace Basin Natural Gas Turkiye Corporation and Pinnacle Turkey, Inc. (collectively, "TBNG") for an aggregate purchase price of $100.0 million in cash and 18.5 million of our common shares. TBNG currently produces approximately 25.0 million cubic feet of natural gas per day in the Thrace Basin and holds interests in a total of approximately 600,000 net onshore acres and 360,000 net offshore acres in Turkey.
We expect to form a special purpose entity to complete the acquisition, with third party investors providing $100 million in funding toward the purchase price. Those investors would hold approximately 65% of TBNG's current production and acreage. We would pay 18.5 million of our common shares for approximately 35% of TBNG's current production and acreage and 100% of TBNG's oil field service equipment and related assets, which includes five drilling rigs. We paid a $10.0 million option fee to the owner of TBNG and have until February 11, 2011 to exercise the option. In the event we do not exercise the option, $5.0 million of the option fee will be returned to us.
"Over the past two decades Thrace Basin Natural Gas has built the most efficient operation I have seen. The acquisition of Thrace Basin Natural Gas and Pinnacle would be the final component in our Thrace Basin strategy. We would complete our presence in the Thrace Basin with additional acreage and an operational base on the southern flank of the basin. This would expand our inventory of shallow gas targets and is a very attractive area for deeper conventional and unconventional gas. In addition, the oil field service equipment will serve us well as we continue to ramp up our activity in Turkey. I can't overstate how pleased I would be to have the employees of Thrace Basin Natural Gas join the TransAtlantic team," said N. Malone Mitchell, 3rd, the Company's Chairman.
For the quarter ended September 30, 2010 our net production, after royalty, was 177,755 barrels of oil at an average rate of 1,932 net barrels per day and 514,179 thousand net cubic feet of natural gas at an average rate of 5,588 thousand net cubic feet per day. Net oil production increased in the third quarter of 2010 as compared to the second quarter of 2010 by 5%, while net natural gas production increased quarter-to-quarter by 45%.
Turkey Operations -- Thrace Basin
For the past several months we have been working with Turkiye Petrolleri Anonim Ortakligi ("TPAO"), the national oil company of Turkey, planning our first fracture stimulations. In October 2010, we successfully pumped the first modern fracture stimulation in Turkey on the Kepirtepe-1 well on License 3791 in the Thrace Basin to test non-commercial natural gas shows in the Mezardere sands at approximately 12,000 feet. The single-stage fracture stimulation was pumped using our high pressure and high volume pumping units, sand blenders and miscellaneous support equipment. Initial flow rates exceeded 4.0 million cubic feet of natural gas per day with some condensate and water. "We expect to complete cleaning of the perforations and final testing of the well with coiled tubing and nitrogen units in late November 2010. The initial flow rate, while preliminary, points to potential production from unconventional tight sands, and we expect to continue applying modern fracture stimulation technology to existing and new wells drilled in the Thrace Basin. By year-end 2010, we expect to have completed single-stage fracture stimulations in four of the five known reservoirs on our acreage in the Thrace Basin. Once we have refined our fracture stimulation techniques on less expensive re-entries, we plan to commence drilling at locations optimized for unconventional potential," said Gary Mize, the Company's President.
Our emphasis in the Thrace Basin has been on defining an inventory of drillable conventional and unconventional targets. Current production is approximately 10.0 million cubic feet of natural gas per day net to our interest, before royalty. In addition we have approximately 10.0 million cubic feet of natural gas per day awaiting connection to pipelines. We expect to bring approximately half of that production on line before year-end 2010, with the balance brought on line in the first quarter of 2011.
As a result of our acquisition of Amity and Petrogas, our acreage in the Thrace Basin increased by approximately 1.3 million gross acres. To accelerate the evaluation of this additional acreage, we have completed two new 3D seismic surveys and are currently acquiring additional 3D seismic data. By mid-2011, we expect to be operating five drilling rigs in the Thrace Basin, with two rigs targeting shallower conventional targets and three rigs targeting deeper targets.
Turkey Operations -- Southeastern Turkey
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