Revus Acquires Palace Exploration
Revus Energy has signed an agreement with Palace Exploration Company to acquire 100% of the shares of its UK subsidiary Palace Exploration Company (UK) Ltd. The total purchase price is US$258 million. Following this transaction Revus is in a position to expand its exploration plans to also include a wider program on the UKCS.
Through this transaction, Revus will increase its current production by approximately 160% and reserves and contingent resources base by approximately 40%. Total reserves and contingent resources acquired are 23.7 mmbbl of which 14.4 mmbbl are classified as reserves. The resource potential of the exploration portfolio will increase by approximately 12 per cent.
The CEO of Revus Energy, Harald Vabo says: "This is an ideal opportunity for Revus to build a substantial position on the UKCS. After we announced our intention to target acquisition opportunities on the UKCS, we have patiently been looking for opportunities like this. The Palace acquisition will provide us with an attractive production base providing the cash flow and tax shelter to support investment in further growth projects. The position also provides attractive potential ranging from near term development candidates and appraisal projects to pure exploration. The Company's current production will increase to approximately 7,000 boepd in 2008 at the same time as the portfolio of growth projects has been further increased and diversified."
Palace is a privately owned US company holding E&P assets on the UK Continental Shelf (UKCS). The principal asset in the UK portfolio is a 29% interest in the currently producing Broom field (4,000 boepd net to Palace). In addition the company owns 29% in the SW Heather discovery, 50% in the recently announced Scolty discovery and interests in a total of 14 exploration licenses covering 28 blocks.
Palace's interest in the Broom field includes estimated remaining reserves of 14.4 mmbbls from existing and future wells with current net production of approximately 4,000 bopd. An infill well into the main field segment is due to spud imminently and this is expected to further increase the production. Further development drilling on Broom is expected to take place over the next couple of years. The field is operated by Lundin Petroleum (55%) and is a sub sea development tied back to the Heather platform, which is also operated by Lundin Petroleum (100%). The Broom field was discovered in 1977 and was brought on production in 2004.
The Southwest Heather discovery was made in 1979 and includes net contingent resources of 4.4 mmbbls. An appraisal well is planned in 2008 and if this is positive the field could be developed as a tie back to Heather with an expected production start in 2011. In Revus' opinion the SW Heather has a large upside potential given the currently expected recovery rate of only 14%.
Palace's exploration portfolio includes interest in 14 licenses with a preliminary estimated net remaining risked resource potential of 34 mmboe. The company is currently in the middle of a drilling campaign and so far results have been reported from two wells. The first well (Lytham) was reported dry with gas shows whereas the second well reported a 10mmbbl Paleocene discovery (Scolty) in which Palace owns 50 per cent. At present the company is participating in the drilling of the Ridgewood prospect in block 12/17 (operated by Lundin), and plans exist to participate in at least one more exploration well in 2008. Palace is partly carried in these wells covering net cost to the company of US$14 million.
Revus plans to fund the transaction through an underwritten debt facility with Royal Bank of Scotland of US$150 million. The remaining part of the acquisition sum will be financed through a combination of current cash, existing debt facility and new equity. The Company has engaged First Securities ASA and SEB Enskilda ASA to act as joint lead advisors in the process to raise the new equity.
Palace has no employees who will follow the transfer. In an initial phase Revus plans to manage the assets from it's headquarter in Stavanger. The board of Palace UK will resign in connection with completion of the transaction and the board members are not granted any benefits nor has any agreements in relation to their resignation been entered into. Chairman of Revus Energy ASA, Dr. Andrew Armour comments: "The Palace acquisition and our recent exploration successes represent significant added value for the Company in 2007. The combination of an attractive and diversified asset base with an active ongoing drilling program, a strong cash position and balance sheet and the company's organizational qualities, gives me confidence in its ability to continue to add value to shareholders."
The effective date of the transaction is 1st of July 2007 with expected completion to take place in Q1 2008. The transaction is subject to approval by The Department for Business, Enterprise and Regulatory Reform, (formerly DTI) and Revus confirming that the Company has sufficient committed funds available for payment of the purchase price.
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Company: Palace Exploration Company more info
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