TIDMMTA
RNS Number : 8400R
Matra Petroleum PLC
31 October 2013
Matra Petroleum Plc
("Matra" or the "Company")
Entry into conventional US onshore oil and gas sector via phased
acquisition of interest in US Joint Venture Company
Suspension of Trading
Matra, the oil and gas investing company, is pleased to announce
that its wholly owned subsidiary, Matra Petroleum U.S.A., Inc.
("Matra USA"), has entered into an agreement which allows it to
make a series of investments into the US onshore oil and gas sector
(the "Purchase Agreement"). Under the Purchase Agreement, Matra
USA, through a series of investments, may acquire up to 38,746 net
acres, across 50 leases located in the Texas Panhandle, with
internally estimated remaining recoverable reserves of 10,575 Mboe,
averaging 68% oil, for an aggregate consideration of up to $28.2
million. The leases in aggregate have existing well stock of 221
wells and an estimated 379 new well locations. Current production
across the leases is approximately 60 boepd.
The Purchase Agreement is structured such that Matra USA may
undertake a phased acquisition of the interests outlined above
through a joint venture vehicle. An initial investment of $1.5
million (the "Phase 1 Investment") has been made and a further two
phases are expected to be completed by the second quarter of
2014.
The completion of all the phased investments as contemplated by
the Purchase Agreement would constitute a Reverse Takeover under
the AIM rules for Companies ("AIM Rules") and accordingly the
trading in the Company's ordinary shares is today being suspended.
Included in the re-admission document will be an independent
competent persons report covering the leases.
Strategic Rationale
The Company believes that the US conventional onshore oil and
gas market represents a compelling investment opportunity as it
offers access to low risk production at attractive valuations
whilst being within a stable fiscal and legal regime.
The Company's management team is experienced in extracting
economic value from mature and depleted fields primarily through
using modern low cost drilling and redevelopment techniques. The
Company is accordingly initially focussing on the Texas Panhandle
region of the USA where there exists shallow conventional
reservoirs (with reservoir depths up to 700 meters), production
history since 1920, high exploration maturity and relatively low
development and operating costs. The Company believes there to be
other consolidation opportunities in the region.
Maxim Barskiy, CEO, commented:
"Over the last year and a half we have invested a great deal of
time and effort in reviewing different projects and believe this
opportunity will become the first step in the realization of our
strategy of building a mid-sized independent E&P Company.
The quality, size and potential of the Texas asset offers
considerable upfront and future value for shareholders. The acreage
acquired provides significant potential production and resources
upside for shareholders, in an excellent fiscal and commercial
environment".
Terms of the Transaction
Introduction
Under the Purchase Agreement Matra USA has initially acquired a
50% interest in a joint venture vehicle, PG-M International, LLC
("PG-M JV"), a Texas limited liability company with certain oil and
gas leasehold interests in the Texas Panhandle region of the USA
(further details of which are set out below). Under the terms of
the Purchase Agreement, Matra USA has paid the seller, PSOFEI, LLC,
consideration of US$1.5 million (the "Phase 1 Investment").
In addition, under the Purchase Agreement, subject to the
satisfaction of certain conditions (including satisfactory due
diligence), Matra USA will make further investments in connection
with the transfer of additional assets to PG-M JV (such investments
being the Phase 2 Investment and the Phase 3 Investment, further
details of which are set out below), and has an option to acquire
the 50% of PG-M JV that it does not already own.
Acquiring the remaining 50% of PG-M JV or undertaking the Phase
3 Investment (further details of which are set out below) would
likely constitute a Reverse Takeover by the Company in accordance
with Rule 14 of the AIM Rules. Accordingly, the Company has
requested the suspension of the Company's ordinary shares pending
the publication of an admission document or the termination of the
Phase 2 Investment and Phase 3 Investment.
Phase 1 Investment
The Company, through its wholly owned subsidiary, Matra USA, has
acquired a 50% interest in PG-M JV, a Texas limited liability
company, from PSOFEI, LLC for $1.5 million (the "Phase 1
Consideration"). PG-M JV currently holds certain oil and gas leases
comprising 480 net acres across the Anadarko Basin located in the
Texas Panhandle encompassing Gray, Carson and Hutchinson counties
(the "Phase 1 Assets"). There are 35 existing wells on the Phase 1
Assets and 20 anticipated new well locations. Matra's internal
management estimate of remaining recoverable reserves is 417
Mboe.
The other 50% of PG-M JV is owned by PSOFEI, LLC, a holding
company owned by Amiba Resources L.L.C., Galaga Resources LLC and
Jenkins Oil & Gas LLC.
Pursuant to a joint operating agreement, Petrolia Group, LLC has
been appointed as operator to service the properties owned by PG-M
JV, and Matra USA and PSOFEI, LLC will jointly agree a work
program.
On the date of signing of the Purchase Agreement, Matra USA has
agreed to fund PG-M JV's work program under a promissory note of up
to US$16,500,000, secured by all of the assets of PG-M JV and
issued by PG-M JV to Matra USA (the "Funding Note"). 50% of the
amounts due under the Funding Note shall be guaranteed by PSOFEI,
LLC, with such guarantee being secured by PSOFEI, LLC's 50%
interest in PG-M JV. The Funding Note shall accrue interest at a
rate of 6% per annum, be repayable on completion of the Phase 3
Investment and otherwise be on normal commercial terms.
Phase 2 Investment
Under Phase 2, Rifle Energy LLC, an affiliate of PSOFEI LLC has
agreed to transfer to PG-M JV certain oil and gas leases comprising
5,759 net acres across the Texas Panhandle encompassing Carson,
Hutchinson and Moore counties (the "Phase 2 Assets"). There are 186
existing wells and 89 anticipated new well locations on the Phase 2
Assets. Matra's internal management estimate of remaining
recoverable reserves is 3,371 Mboe.
In consideration for such transfer, Matra USA has agreed to pay
to PSOFEI, LLC up to US$3,850,000 and loan to PSOFEI, LLC up to
US$5,350,000 pursuant to a promissory note secured by PSOFEI, LLC's
50% interest in PG-M JV (the "Phase 2 Loan") (together with the
transfer of the Phase 2 Assets, the "Phase 2 Investment"). The
Phase 2 Loan shall accrue interest at a rate of 6% per annum, be
repayable on completion of the Phase 3 Investment and otherwise be
on normal commercial terms. The closing of the Phase 2 Investment
is subject to customary title review and closing conditions. It is
anticipated that completion of the Phase 2 Investment will take
place on or around 15 January 2014.
Pursuant to the Purchase Agreement, following completion of the
Phase 2 Investment, Matra USA may exercise an option to acquire the
50% of PG-M JV that it does not already own, in consideration for
the cancellation by Matra USA of the debt outstanding to it under
the Phase 2 Loan (the "PGM-JV Option"). The exercise by Matra USA
of the PG-M JV Option would likely constitute a Reverse Takeover
under the AIM Rules as, by taking control of PG-M JV, the Company
expects to become a trading company for the purposes of the AIM
Rules.
Phase 3 Investment
Under Phase 3, Signal Drilling LLC, an affiliate of PSOFEI, LLC,
has agreed to transfer to PG-M JV certain oil and gas leases
comprising 32,507 net acres across Hutchinson county (the "Phase 3
Assets"). The Company has identified 270 anticipated new well
locations on the Phase 3 Assets. Matra's internal management
estimate of remaining recoverable reserves is 6,788 Mboe.
In consideration for such transfer, PG-M JV has agreed to pay up
to US$5,000,000 and deliver to Signal Drilling LLC a promissory
note for a principal amount of up to US$12,500,000, secured by a
first lien deed of trust on an undivided interest in the Company's
working interests valued at the principal amount of the promissory
note (the "Phase 3 Note") (together with the transfer of the Phase
3 Assets, the "Phase 3 Investment"). The Phase 3 Note shall accrue
interest at a rate of 6% per annum, be repayable on 31 December
2014 and otherwise be on normal commercial terms. The closing of
the Phase 3 Investment is subject to customary title review and
closing conditions. PG-M JV has the right to complete the Phase 3
Investment until 15 April 2014.
The Phase 3 Investment, when aggregated with the Phase 1
Investment and the Phase 2 Investment would likely constitute a
reverse takeover by the Company of PG-M JV under the AIM Rules
(even if the PG-M JV Option is not exercised).
Phased Transaction
Completion of the Phase 2 Investment and the Phase 3 Investment
is subject to the satisfaction of certain conditions, including the
completion of satisfactory due diligence (in the event that title
defects relating to the assets are identified during the due
diligence process, the Purchase Agreement contains a title defect
procedure whereby defects may be addressed through the curing of
such defects, the transfer of additional assets to compensate for
the defect or a reduction in the consideration due). In addition,
the Phase 3 Investment and the exercise of the PG-M JV Option would
likely trigger the requirements of a Reverse Takeover under the AIM
Rules. Accordingly, there can be no certainty at this stage that
Matra USA will proceed beyond the Phase 1 Investment. In the event
Matra USA does not proceed past Phase 1 and does not wish to
acquire the remaining 50% of PG-M JV, Matra will remain an
Investing Company for the purposes of the AIM Rules.
Option to subscribe for ordinary shares in the Company
In addition, the Company has entered into an option agreement
with PSOFEI, LLC pursuant to which the Company has granted to
PSOFEI, LLC options to subscribe for 150,000,000 ordinary shares in
the Company at a price of 2.24 pence per ordinary share. The
options may be exercised for a period of one year following the
later to occur of: (a) completion of the Phase 2 Investment; and
(b) readmission of the Company's ordinary shares to trading on AIM
following a Reverse Takeover by the Company of PG-M JV (in any of
the ways described above).
Working Interest Assignment
Subject to completion of the Phase 3 Investment and PG-M JV
making a return of 150% of the sum of its acquisition investment
and 100% of its investment in certain expenses from the proceeds of
the sale of oil and gas and other revenue in respect of the assets,
PG-M JV shall deliver as a working interest an undivided 3% of its
interest in the assets to PSOFWI, LP, subject to the terms of the
JOA.
Suspension of trading in ordinary shares
While there can be no certainty that the PG-M JV Option will be
exercised or the Phase 3 Investment will proceed, should they do so
it will constitute a Reverse Takeover under Rule 14 of the AIM
Rules and will be conditional upon, inter alia, Matra USA entering
into final acquisition documentation, the publication of an
admission document and the approval of Matra shareholders at a
general meeting. Accordingly, trading in the Company's ordinary
shares is being temporarily suspended until such time as it
publishes an admission document or the relevant transactions
otherwise no longer proceed.
Should a reverse takeover not be capable of completion, the
Company will remain an investing company holding certain assets
through a 50% owned joint venture structure.
For further information, please contact:
Matra Petroleum plc c/o Pelham Bell Pottinger
Henry Lerwill 020 7861 3169
Canaccord Genuity Limited
Henry Fitzgerald-O'Connor 0207 523 8000
This statement has been approved by the Company's CTO Igor
Indychko with over 21 years of experience in petroleum exploration
and production for the purpose of the Guidance Note for Mining, Oil
and Gas Companies issued by the London Stock Exchange in respect of
AIM companies, which outline standards of disclosure for mineral
projects.
Glossary of Technical Terms
Mboe Thousand barrels of oil equivalent
This information is provided by RNS
The company news service from the London Stock Exchange
END
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