Salamander to Acquire Remaining Interest in Gulf of Thailand License
Salamander's subsidiary, Salamander Bualuang, has reached agreement with SOCO International to purchase SOCO Thailand. SOCO Thailand owns SOCO Thailand, which holds a 40% interest in the B8/38 license in the Gulf of Thailand.
Salamander currently owns 60% of the B8/38 license, which contains the Bualuang oil field, and is the operator of the field. As of December 31, 2009, the estimated gross proved and probable reserves in the Bualuang oil field amounted to approximately 22.5 million barrels of oil (MMbo). Three horizontal development wells were completed in H1 2010, and the field is forecast to produce approximately 8,500 barrels of oil per day (bopd) on average in 2010, in line with expectations.
The transaction has an effective date of January 1, 2010. The consideration for the acquisition is US $105 million in cash, less a working capital adjustment for the period from the effective date to closing and certain other effective date adjustments. In addition, a $1 million contingent cash payment will be made upon production of a million barrels of oil from any new discovery made within the B8/38 license area, and located five kilometres or more from the existing Bualuang oil field. The transaction is scheduled to complete during August 2010.
For the 12 months ended December 31, 2009, on an IFRS basis, SOCO Thailand generated revenues of approximately US $62 million and profit before taxation of approximately US $39 million. Gross assets of SOCO Thailand, as at 31 December 2009, were approximately US $40 million.
Due to the size of this transaction, the acquisition constitutes a Class 1 transaction for Salamander and is therefore conditional upon receiving approval from shareholders. The acquisition will also be conditional on the approval of SOCO shareholders.
The transaction has a clear strategic and financial rationale. In particular the acquisition:
- increases Salamander's proforma proved and probable reserves as at December 31, 2009 by 9 MMbo to 73.8 MMboe;
- further grows production; on completion of the deal Salamander's average daily production in 2010, will increase to over 20,000 barrels of oil equivalent per day;
- increases Salamander's exposure to low cost, low risk and high value exploration in the B8/38 license, over which 3D seismic data has recently been acquired;
- provides cash flow growth to underpin the Group's exploration and appraisal activities;
- provides increased flexibility to further develop the asset and grow future value through control of 100% of the B8/38 license.
Salamander will finance the proposed acquisition through a combination of cash and a new $90 million, 18 month Bridge facility provided by Standard Chartered Bank and BNP Paribas.
A Circular will be sent to shareholders in due course and a General Meeting is expected to take place in August 2010.
James Menzies, Chief Executive of Salamander, said, "This transaction represents a deepening of our interests in an asset we already operate and which we know well. We see scope for further exploiting the Bualuang oil field and the attractive, low risk exploration potential in the B8/38 license. We have recently acquired 3D seismic data over the license and we plan to start drilling in the fourth quarter of 2010. The increased interest in B8/38 license provides us with enhanced current production and cash flow, future growth and more material exposure to upside in the acreage."
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