Melrose Snaps Up Stakes in Romanian Black Sea Blocks
Melrose Resources has signed a fully termed Farm-in Agreement with Sterling Resources Ltd under which it will farm-into the Pelican XIII and Midia XV Blocks (the "Blocks") in the Black Sea, offshore Romania. The Company previously announced on December 5, 2008 that Heads of Terms had been agreed with Sterling with regards to this transaction.
Midia XV contains the undeveloped Ana and Doina gas fields, which the Company estimates to contain gross combined probable reserves of 288 Bcf and which are expected to be sanctioned for development in early 2010. The Blocks also contain a significant number of exploration prospects and leads which are candidates for drilling in the short to medium term.
Under the terms of the farm-in, Melrose will earn a 32.5% interest in the Blocks in return for providing $12 million ("m") of funding to Sterling when the transaction completes in the second quarter of 2009. Melrose will also carry Sterling for a proportion of their future development costs ranging between $63m and $78m, depending on the gas price achieved for the development projects.
The majority of the costs associated with the farm-in will not be committed or incurred until 2010 and 2011, after the first field development is sanctioned and project financing secured against the assets.
The farm-in will add 15.6 MMboe of net probable reserves, equivalent to 23% of the Company's year end 2008 proved plus probable reserves, and the acquisition cost will be between $4.81/boe and $5.77/boe. Further economic upside exists in the exploration acreage, which is estimated to have net unrisked reserves potential in excess of 300 Bcf and 20 MMbbls, and through the possibility of capturing third party transportation and processing business through the Ana and Doina infrastructure.
Melrosewill assume operatorship of the development projects when the transaction completes in order to leverage the Company's operating experience from the Galata field development in the Black Sea, offshore Bulgaria. Sterling will continue to operate the exploration activities on the Blocks until the end of 2011 in order to take advantage of its regional technical knowledge and build on recent exploration successes.
The transaction completion is subject to the appropriate government, partner, regulatory and financial approvals.
Commenting on the above, David Thomas, Chief Executive, said, "We were delighted to sign the Farm-in Agreement with Sterling. The farm-in will add significant value and it provides us with the opportunity to strengthen Melrose's portfolio in a core operating area by acquiring material interests in two high quality concessions. It will also increase the Company's exposure to Eastern European gas markets which we believe will continue to deregulate with prices set to converge on Western European levels over time. We very much look forward to working with Sterling and the other block partners over the future months and years."
- Beach Expects Regulatory Nod for Farm-In Offshore Romania by Mid-Oct (Sep 13)
- Melrose and Petroceltic Plan to Merge (Aug 17)
- Exxon, Total Bid for Gas Drilling in The Black Sea (Jun 21)
Company: Sterling Resources more info
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