As a result of the increase in its 'Trees' interests to 100%, Venture's net production is expected to rise by an average of 4,000 barrels of oil equivalent ('boe') per day. Based upon estimates at 30 June 2004, Venture's Proven and Probable reserves will increase by 10.4 million boe to a total of 116.3 million boe.
In addition to the proven producing fields in Birch, Larch and central Sycamore, Venture is also acquiring the remaining interest in the development of the southern part of the Sycamore field and several other discoveries and prospects within Block 16/12a. In the other four acquired blocks, Venture is gaining interests in several non-operated discoveries and a number of exploration opportunities. Work is currently underway to establish how best to realise the potential value of these new assets, which are outwith Venture's existing business hubs.
The total consideration for the acquisition will be $50 million (approximately £28million) payable in cash, with an adjustment for net cashflows and working capital in the period since the effective date of 1 July 2004. In addition, Venture will pay Marubeni an overriding royalty on two undrilled exploration prospects, Ash and Cedar located in Block 16/12a, in the event of successful commercial development of either of the prospects. The additional production assets bring with them a significant degree of incremental debt capacity and so the immediate cash consideration will be wholly financed from Venture's existing banking facilities. However, in light of the additional prospect inventory that has been acquired, the Company is actively reviewing its longer term financing requirements and capital structure. Legal completion of the transaction is anticipated to take place during the fourth quarter of this year, subject to normal regulatory and partner approvals and final corporate approval from Marubeni Corporation.
Commenting on the news, Bruce Dingwall, Chief Executive said:
'With the recent successful rejuvenation of Birch and the stabilization of production from Sycamore, the 'Trees' area remains a key asset within Venture's business. I am, therefore, delighted that we have reached agreement with Marubeni to acquire their stake as they have proved an excellent partner in the development of the assets thus far.
'In addition to adding significantly to current oil production and our operational flexibility, this expansion of our interest in 'Trees' offers a range of Block 16/12a growth projects in which to invest over the next several years. We also relish gaining exposure to a fresh UKCS development and prospect inventory as part of the package of acquired interests.'
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