TransAtlantic has acquired over 65% of the outstanding shares of Incremental Petroleum Limited ("Incremental") under the terms of its previously announced all-cash takeover offer (the "Offer"). TransAtlantic Australia and N. Malone Mitchell, 3rd, the Company's Chairman, now own or have received acceptances under the Offer of over 94% of Incremental's outstanding shares. After the close of the Offer today, TransAtlantic Australia expects to acquire the balance of Incremental's outstanding shares pursuant to a statutory procedure and then delist Incremental from the Australian Stock Exchange.
"This acquisition represents an important milestone for TransAtlantic. It is a major step in our pursuit to build a premier producing oil & gas company," said Matthew McCann, CEO of the Company.
"The acquisition would not have been possible without the commitment Malone Mitchell made to TransAtlantic," Mr. McCann said. Mr. Mitchell, who loaned the Company funds sufficient to enable the purchase of Incremental, commented on the acquisition, "Incremental is a great fit with TransAtlantic. Incremental has an outstanding staff and portfolio of assets. It is a pretty straightforward acquisition formula: buy the right assets supported by the right people at the right price." Mr. Mitchell further noted, "Incremental affords the opportunity to drive additional shareholder value by fully developing Incremental's Selmo and Edirne fields."
The acquisition expands the Company's rig fleet from four to seven rigs and increases the highly qualified workforce of field staff, engineers, and geologists in one of the Company's target countries. Incremental's portfolio consists of the producing Selmo oil field, the Edirne gas field and additional exploration acreage in Turkey, and three prospects in the U.S. Incremental's portfolio provides the Company with a base of production with significant potential upside. For the year ended December 31, 2008, Incremental generated revenues and EBITDA of U.S. $45 million and U.S. $21 million, respectively.
Selmo Oil Field (100% interest) -- The Company has begun analyzing opportunities to fully develop Selmo, which produced over 493,000 barrels of oil in 2008 and is ranked as the second largest oil field in Turkey in terms of cumulative production. Situated on the northern edge of the prolific Zagros fold belt of Iran and Iraq in southeastern Turkey, oil from Selmo has been recovered from less than 50 wells, with average well spacing exceeding 180 acres per well. "With low recovery factors relative to the original oil in place, and the low density of wells in the field, we see the opportunity to increase production and the ultimate recoverable oil by drilling additional wells within the field," Mr. McCann said.
Mr. Mitchell added, "This is exactly the type of opportunity we were looking for. We will enhance Incremental's existing operations by bringing our expertise and equipment to Incremental's already significant base of operations. We anticipate realizing the benefits of our lower costs in a vertically integrated business model."
Near Term Production Growth Opportunities
Edirne Gas Project (55% interest) -- The Edirne gas project will become the Company's second major production project in Turkey. Located in the Thrace Basin of northwestern Turkey, Edirne's large concession area and favorable geological environment for gas accumulations is demonstrated by seven discoveries from eight wells drilled to date. Edirne has numerous prospects on the remainder of the license that may add to future gas production. It is important to highlight that Turkey's state-owned pipeline company and gas pricing benchmark, Botas, is currently pricing natural gas at over U.S. $10 per thousand cubic feet.
McFlurrey Gas Project (50% interest) -- The Company will earn a 50% interest (37.5% revenue interest) by drilling two wells. The wells, which are less than 5,000 feet, are planned for the second quarter of 2009 and are estimated to cost less than U.S. $2 million to drill and complete.
The wells are about four miles from the nearest pipeline and the Company would have to build a line to sell gas. Located in the fertile San Joaquin Basin in central California, the two wells in McFlurrey effectively offset several older "show wells," which tested gas at significant rates.
License 4262 (formerly 60%, now 100% interest) - The Company started its involvement with Incremental in September 2008, when TransAtlantic Turkey Ltd. ("TransAtlantic Turkey"), a wholly-owned subsidiary of the Company, farmed-in to Incremental's 4262 exploration license. In exchange for a 60% interest, TransAtlantic Turkey agreed to drill one well to a depth of approximately 10,500 feet. By acquiring Incremental, the Company will receive additional interest with no additional cost, as TransAtlantic Turkey was previously carrying 100% of Incremental's cost.
Incremental's remaining portfolio consists of several large exploration targets near Ankara, Turkey and two prospects in California.
"We're excited about the Company's future and look forward to adding additional value for TransAtlantic's shareholders," said Matthew McCann, CEO of TransAtlantic.
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