Toreador Resources Corporation has entered into a letter of intent to sell 26.75% of the company’s 36.75% interest in the South Akcakoca Sub-basin natural gas project and eight contiguous exploration blocks in the Turkish Black Sea (referred to as the “Western Black Sea” permits) for gross proceeds of $80.25 million. The transaction is subject to Turkish government approval and joint venture partners’ preemption rights. After the transaction Toreador will retain a 10% working interest in the joint venture. Net proceeds from the sale will be used to reduce debt and for general corporate purposes. The transaction is expected to be completed early in the fourth quarter. However, no assurance can be given that the transaction will close on the terms contemplated. As described below, the company is incurring an asset impairment charge due to entering into the letter of intent.
"The completion of this transaction will help us achieve two important strategic goals,” said Toreador President and Chief Executive Officer, Nigel Lovett. "First, we will greatly reduce our operational risk to one more appropriate for a company of our size and, secondly, we can use the proceeds to strengthen our balance sheet and reduce our financial risk. We believe the metrics associated with this transaction materially exceed all the metrics on which our company as a whole currently trades."
Hungarian joint venture updates
In Toreador’s Szolnok block, joint venture partner Rohöl Aufuchungs Aktiengesellschaft (RAG, a public Austrian exploration and production company) has increased its working interest from 16.25% to 59.5% by purchasing interests from the other joint venture partners, including Toreador. Toreador has retained a 15% working interest in the joint venture. Current plans call for a new 3D seismic program to be shot in the southern portion of the Szolnok block and two firm wells and two optional wells to be drilled to test Pannonian targets, all anticipated to be completed before the end of March 2009. Toreador intends to contribute materials in its equipment and tubulars inventory to satisfy its financial commitment to the well costs.
In the Tompa block, a preliminary schedule for the previously announced unconventional deep gas test has been developed, with drilling scheduled to begin in December and long-term testing expected to begin in March. The well is currently planned to be drilled to 3,800 meters depth to evaluate in excess of 1,000 meters of overpressured, gas-charged sands, shales and conglomerates up-dip of two wells drilled in the 1980s by the U.S. Geological Survey and the predecessor of MOL. A pre-drill estimate for the prospect, which covers approximately 2,400 acres in the northwest corner of the Tompa block, is approximately 244 Bcf of gas in place. Any production during the testing phase is planned to be sold to a near-by gas storage facility pursuant to a sales contract currently under negotiation.
Turkish joint venture updates
Toreador has entered into a joint venture agreement with AKSA Enerji Uretim A.ª., a division of the Kazanci Group of Companies, to evaluate the hydrocarbon potential in the company’s 95,287-acre Bakuk exploration permit, located in southeast Turkey on the Syrian border. According to the terms of the agreement, AKSA will pay for the first $500,000 of a $1.4 million 2D seismic program (due to start in late August 2008) and the first $1.2 million of a $2.1 million well expected to be drilled during the first half of 2009 in return for a 50% working interest in the permit area. The area is on trend with oil fields in Turkey and Syria and is prospective for both natural gas and oil.
In the South Akcakoca Sub-basin project in the Black Sea offshore Turkey, the operator TPAO (the Turkish national oil company) recently reduced production rates to levels approximating 18 million cubic feet per day to obtain more consistent production rates and pressures. Work is planned next week to perforate six meters in the Dogu Ayazli-2 well to maintain or raise the current production rate. The wellhead gas price (at present exchange rates) increased to approximately $13.66 per thousand cubic feet (Mcf) in August, which represents the third price increase this year up from approximately $10.30 per Mcf in January.
Romanian joint venture announced
In Toreador’s Moinesti block, a joint venture agreement has been executed with Stratum Energy Company Limited, a private Texas-based exploration and production company. The terms of the agreement call for Stratum to either re-enter a well and drill two new wells or drill three new wells to earn a 70% interest and operatorship in the Moinesti block. Toreador will be carried for the three well program and will retain a 30% working interest.
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