Mosman Oil & Gas Signs Deal to Acquire NZ Onshore Assets from Origin Energy
Mosman Oil and Gas Ltd., the New Zealand (NZ) and Australia focussed oil exploration and development company, disclosed Thursday that it has executed a conditional sale and purchase agreement (SPA) to acquire onshore NZ producing oil and gas assets for $6.4 million (NZD 10 million or approximately GBP 4.2 million) (the Acquisition or the Project).
Mosman has also today entered into a participation agreement (STEP Agreement) with WRDLS Pty Ltd. (WRDLS). WRDLS is a private company with resource and energy sector experienced personnel, including Dr. Ray Shaw. Dr. Shaw has more than 30 years' experience, including former director, managing director and chairman roles of resource companies listed on the Australian Securities Exchange Ltd. (ASX). WRDLS has agreed to acquire at least 30 percent of the Project.
Mosman's intention is to own at least 40 percent and no more than 70 percent of the Project and is actively considering further offers from potential JV partners.
The Acquisition remains subject to a number of matters including financing.
- The Project assets include fully operational and established oil and gas processing facilities, equipment, permits, excellent infrastructure, assignment of key employee contracts and the assignment of relevant commercial contracts including oil and gas sales contracts
- It currently produces oil, condensate, gas, LPG and electricity, which deliver several revenue streams. The facilities were the subject to a major refurbishment in 2014 and since restart in October 2014 have been producing an average 603 barrels of oil equivalent per day (boepd)* which would generate annual revenue of approximately $5.1 million (NZD 8 million) based on current production rates, oil price and exchange rates
- The Project will be renamed the South Taranaki Energy Project (STEP). It will be operated under a joint operating agreement (JOA) and Mosman will be the operator. The assets being acquired include the Rimu Production Station and two petroleum mining permits (PMP). The Project also includes:
- 2P reserves of 1.9 billion cubic feet (Bcf) gas and 1.4 million barrels oil*
- 2C resources of 13.7 Bcf gas and 4.1 million barrels oil*
- Prospective resources estimated at 179 Bcf and 166 million barrels*
- Historically the Project facility has produced over 10 Bcf (10.9 petajoules or PJ) gas and 1.58 million barrels oil*
- Mosman has identified 12 low cost projects that could potentially significantly increase production at an estimated cost of $1.7 million (NZD 2.6 million). None of these projects require drilling of new wells (which will be considered in due course)
- Total consideration of $6.4 million (NZD 10 million or approximately GBP 4.2 million) to be paid in two tranches, the first tranche of $4.5 million (NZD 7 million) is payable upon completion of the Acquisition and the second tranche of $1.9 million (NZD 3 million) six months following completion. A 5 percent deposit was paid by Mosman upon executing the SPA. Mosman's total contribution towards the consideration for the Acquisition is subject to final percentage ownership. Based on 70 percent ownership, it would be $4.5 million (NZD 7 million or approximately GBP 2.9 million), the first tranche being $3.1 million (NZD 4.9 million or approximately GBP 2.1 million) and the second tranche being $1.3 million (NZD 2.1 million or approximately GBP 0.9 million). Mosman's first tranche of consideration will be reduced by the deposit of $0.3 million (NZD 0.5 million or approximately GBP 0.2 million), which deposit has been paid by Mosman in full
- Mosman intends to finance its share of the Acquisition through a combination of existing cash, sale of a royalty on future production, debt, equity, and convertible securities
- The SPA remains conditional upon a number of conditions precedent including: Mosman and its JV partners providing reasonable assurance of its financial capability to pay the total consideration due for the Project assets on or before Sept. 30; and the granting of certain approvals from the NZ Government before settlement
- Mosman's aggregate liability under the SPA is limited to $4.8 million (NZD 7.5 million), for example should a JV party default on its obligations to Mosman after Sept. 30
*Represents numbers supplied by Origin that have been subject to due diligence by Mosman. Prepared to be consistent with the Society of Petroleum Engineers definitions
The Chairman of Mosman, John W Barr, said: "We are delighted to have signed the SPA and the STEP agreement on a deal that the Board believes will be transformational for Mosman. Numerous opportunities to increase production in the short term have been identified and there is significant upside in development of the Manutahi oil field that originally had 30 million barrels of oil in place.*
Acquisition and Funding
Mosman has now signed the SPA to acquire the Project; paid a 5 percent deposit and entered into the STEP agreement. Each party will contribute a share of the consideration in proportion to their final ownership percentages in the Project.
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