Aidan Heavey, Tullow's Chief Executive commented:
"This acquisition of Schooner and Ketch is a step-change for our UK gas business, adding substantial base production with significant upside potential and a material offshore operatorship that complements our existing assets in the Caister-Murdoch System. Following on from the Energy Africa acquisition completed in late May, the Schooner and Ketch acquisition completes a transforming year for Tullow, during which the company has concluded over a billion dollars of transactions." The total consideration for the transaction is £200 million, inclusive of capital allowances, with an effective date of 1 st July 2004. The net consideration payable by Tullow on completion will reflect revenues and costs accruing to the interest from the effective date. The transaction will be financed through a combination of bank debt and internal resources. Completion is targeted for the first quarter of 2005. The producing interests to be acquired are a 90.35% interest in the Schooner field and a 100% interest in the Ketch field. These fields have been in production since 1996 and 1999 respectively and currently produce approximately 60 mmscfd of gas, which is transported to the Theddlethorpe terminal via the Caister-Murdoch System ("CMS") infrastructure in which Tullow has a 17% interest. The gas initially in place for the Schooner and Ketch fields is in excess of 1,500 bcf of which only 350 bcf has so far been recovered. On completion, Tullow will commence a 3-year development program, designed to substantially increase production levels with the potential to increase the ultimate recovery to 50%. The work program will consist of working over and sidetracking existing wells and drilling new wells to access previously undrained compartments in the fields. This acquisition strongly enhances Tullow's already significant acreage position in this part of the Southern North Sea. In addition to the producing assets, Tullow will also acquire minority interests in the Topaz, Marjan, and 44/27-1 discoveries. The acreage acquired also offers attractive exploration upside, principally from the Schooner Extension prospect, which lies immediately southeast of the Schooner field. Tullow plans a fast-track subsurface evaluation of this prospect and two adjacent blocks that Tullow, as operator, was recently awarded in the 22 nd licensing round. This transaction transforms Tullow's UK gas business, further consolidates its position in the CMS core area and enables it to capitalise on its technical expertise developed through its current ownership of CMS assets. Upon completion, Tullow will operate over 60% of its UK gas production.
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