Granby: Partners, Regulators Okay Galoc Development Plan
Development of the Galoc oil field is now fully approved by co-venturers and the relevant authorities. The drill rig is now expected to arrive in the field in September 2007, with first oil production from the field expected in Q1 2008 at an initial rate of approximately 15,000 bopd, with the development expected to recover up to 16mmbbls.
The financing has been fully underwritten by sole lead arranger Intesa Sanpaolo S.p.A. Hong Kong Branch (Rated AA-/Aaa3). Intesa Sanpaolo was originally appointed as Financial Advisor to GPC to structure the financing arrangements. Intesa Sanpaolo has subsequently underwritten 100% of the required debt tranches for GPC, and is expected to syndicate the transaction to 3 other relationship banks of the GPC partners.
The field is located in 290m of water approximately 50 km northwest of the northern tip of Palawan Island. The development being undertaken involves 2 subsea wells with extended reservoir contacts, connected to the Floating Production Storage and Offloading unit (FPSO) via a seabed pipeline and mid-water riser system.
It is anticipated that additional wells and facility capacity will be installed once the performance of the reservoir is confirmed. GPC has obtained the final Department of Energy approvals along with the environmental compliance certificate issued by the Department of Environment and Natural Resources through the Environmental Management Bureau. All major contracts for drilling, sub-sea installation and equipment and the FPSO have been signed and the cost of development is now locked in under firm contract orders.
Bob Moore, Commercial Director of Granby Oil and Gas, said:
"Granby has been instrumental in the development of the Galoc Field which was previously a moribund discovery and now has first oil scheduled for Q1 2008. Using our integrated technical and commercial approach Granby was closely involved in the Field Development Plan and process which has now resulted in a fully financed project through GPC.
"We are also very pleased with the excellent work done by the GPC project management team based in Singapore which is operator of the development."
Overview of Galoc
The Galoc Field lies in the NW Palawan basin offshore Philippines in a water depth of 320m. The field was discovered in 1981 and produced 385,000 barrels on long term test in 1988. Team Oil (a wholly owned subsidiary of Granby) and its co-venturer Cape Energy demonstrated the commercial potential of the field and farmed into Block C of Service Contract Area 14 (SC14) in September 2004. Team Oil subsequently arranged the initial financing plan for the project then exchanged its interest for a shareholding in GPC.
The first phase of the field development plan, which was approved by the Philippines Department of Energy in March this year, consists of two horizontal subsea wells which will be connected via a flowline and riser system to a floating production, storage and offloading vessel.
Granby also recently announced the award of the project's first two major contracts for a drilling rig and subsea trees. The Energy Searcher, a drill ship managed by Jet Drilling, is expected to begin drilling the two wells in September 2007. The FPSO is contracted and fabrication of the process plant is underway, second-hand trees have been purchased and are being refurbished. First oil production from the field is expected in Q1 2008 at an initial rate of approximately 15,000 bopd. Further contracts are expected to be awarded shortly.
The US$77.5 million in debt facilities consist of three tranches; two non-recourse debt tranches totaling over two thirds of the debt and one contingent recourse debt tranche for the remainder. This structure is in addition to the equity provided by the Sponsors and has been supplemented by a fixed amount of completion support by the Sponsors and operating cash shortfall support with a release mechanism linked to oil field production performance. The borrowers are GPC for the oil block development and Vitol Marine Asia, an intermediate entity for the purposes of the term lease arrangement for the FPSO facility on behalf of GPC. The creative debt structure has minimized sponsor completion support and allowed for the conversion of the recourse debt tranche to non-recourse based on the attainment of certain production and coverage ratios.
Intesa Sanpaolo structured the deal based on the Perth based technical and reservoir consultant RISC's assessment of the proven and probable reserve base. A larger non-recourse element of the loan was structured on the proven (P90) reserve levels, whereas the recourse level provides the sponsors an upside wherein the full amount of the loan could be converted to non-recourse as and when the equity forecast production levels are attained. GPC will also benefit from a crude oil hedging mechanism put in place prior to financial close that will greatly limit the oil price volatility risk and underpin the future revenue stream.
Overview of Granby
Granby Oil and Gas plc focuses on exploration in carefully selected areas in the North Sea and elsewhere, and also on securing oil and gas production and developments. The Group's strategy is to build a significant portfolio of assets through both discovery and exploitation of oil and gas reserves.
Granby raised £11.5m in 2005, of which £10m was from a placing and Admission to AIM in June 2005 and an additional £9m in a placing in August 2006.
Granby's portfolio and plans
Granby's current acreage comprises interests in a portfolio of offshore licenses in the North Sea, containing multiple prospects generated by the Company. Granby also has an interest in a single onshore license in Yorkshire.
Granby's next exploration well is expected to be drilled onshore in Yorkshire later in the year.
Granby has a 42% participating interest in the Tristan North West gas development in block 49/29b in the UK Southern North Sea and has executed a loan facility agreement with Mitsubishi Corporation for the development. A rig has been contracted and a tree, controls & flowline purchased. First gas is expected at the end of 2007.
Granby also has a 9.0% interest in the Monkwell gas field, which consists of two separate dry gas accumulations located in UKCS License P.001, Block 42/29a. The field was discovered in 1989 by well 42/29-6, which produced gas at a rate of 26.8mmcfd from the Lower Leman Sandstone. The field was appraised by two further wells that also tested gas. The operator is actively progressing engineering studies on the Monkwell gas field, targeting near-term gas production as a subsea tie-back to nearby infrastructure.