Trapoil announced the acquisition of Reach Oil & Gas Limited ("Reach") for a total consideration of approximately £30 million (£20 million in cash and approximately £10 million in new ordinary shares to be issued at a deemed price of 43 pence per share). Reach's two wholly-owned subsidiaries, Reach Exploration (UK) Limited ("Reach UK") and Reach Petroleum Limited ("Reach Petroleum") (together, the "Reach Group"), currently hold mostly carried interests in a total of 14 exploration licenses governing 24 Blocks and part Blocks in the UK Continental Shelf ("UKCS").
As part of the arrangements, Miles Newman, Exploration Director and co-vendor of Reach, will be appointed to the board of directors of Trapoil (the "Board") as a Non-Executive Director.
Mark Groves Gidney, Chief Executive Officer of Trapoil, commented, "I am delighted to announce our first corporate acquisition, which greatly strengthens our existing portfolio, delivers the drilling opportunities envisaged at the time of our IPO and positions Trapoil as one of the more active exploration and appraisal companies in the UK North Sea, with the possibility of drilling up to 8 wells a year in 2012 and beyond.
The acquisition offers multiple benefits for Trapoil, including an increased interest in the promising Orchid well, due to spud this autumn. In addition, the acquisition brings significant existing carried drilling costs, while we anticipate valuable cash flow generation from near term production and effective portfolio management.
Having successfully secured this attractive portfolio to augment our existing assets, the Company's focus will turn to identifying and acquiring producing assets in order to provide sufficient cash flows to support the group's planned drilling program with suitable tax synergies.
I welcome the appointment of Miles to the Board and I am delighted that he has agreed to accept a significant part of the purchase consideration in the form of new Trapoil shares, underlining his long-term commitment to the Company's future success."
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