In exchange for the above assets, Dana will assign to Agip a 3% interest in UK North Sea Quadrant 23 exploration blocks 23/16c, 23/16d and 23/17a and pay a cash consideration of £48.15 million adjusted for an effective date of 1st July 2001. Two contingent cash payments, each of £3 million, will become due should the Banff field produce firstly 17 million barrels of oil and secondly 30 million barrels of oil as measured from the effective date. Dana will retain a significant, 27% interest in the Quadrant 23 exploration blocks where a well will shortly be drilled to test the Barbara exploration prospect.
Based on data from the respective field operators, Dana currently estimates the net proven and probable reserves associated with the new assets to be around 19 million barrels of oil equivalent. Significant further discovered, but as yet undeveloped, possible reserves have also been identified. In addition, a number of attractive exploration targets are present within the portfolio. On completion of the deal, Dana's oil and gas output is expected to rise to approximately 11,000 barrels of oil equivalent per day. Dana's total production will grow to approximately 20,000 barrels per day when the Otter and Caledonia fields come on stream around the end of 2002. In parallel with the exchange, Dana has signed an agreement with Barclays Capital to arrange a new US$75 million revolving credit facility for the Group. Following the transaction Dana's gearing is expected to remain less than 30%.
The exchange remains conditional upon approval from the UK Department of Trade and Industry and license co-venturers. In addition, Dana intends to convene an Extraordinary General Meeting to seek the necessary shareholder approval, and the circular to shareholders calling this meeting will contain a more detailed description of the assets and proposed transaction.
Dana's Chief Executive Tom Cross commented: "This deal represents a major value-adding step for Dana. The Group's production is now expected to more than treble over the next year and deliver a robust, low cost earnings base, from six UK oil and gas fields. In line with Dana's strategy, some of the enhanced cashflow will be used to drive forward our exciting exploration programme, focused in Europe and Africa. In addition to stronger future revenues, Dana should also benefit from the significant reserves upside which has been identified in and around these new properties, such as the Melville oil discovery, which could be a fast-track development through the Hudson field following an appraisal well planned for later this year."
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