Conditional acquisition of Cory Moruga; CO2 EOR collaboration and settlement with Challenger Energy Group Plc
Highlights
· Settlement reached with Challenger Energy Group PLC
· Progressing acquisition of Cory Moruga oil field in Trinidad
· US$9 million Gross Consideration
· Net payment of US$3 million cash, in staged payments with US$6 million of potential liabilities and other value items offset against Gross Consideration
· Cory Moruga under-developed and very well suited to application of CO2 EOR
Predator Oil & Gas Holdings Plc (LSE: PRD), the Jersey based Oil and Gas Company with near-term gas operations focussed on Morocco, is pleased to announce that it has today entered into a binding Term Sheet (the “Term Sheet”) with Challenger Energy Group PLC (“Challenger Energy”), providing for:
(i) the acquisition of Challenger Energy’s 83.8% interest in the Cory Moruga asset; and
(ii) a mutually agreed final settlement in relation to the Well Participation Agreement under which a CO2 enhanced oil recovery project (“CO2 EOR”) was carried out by Predator Oil & Gas Trinidad in CEG Inniss-Trinity Trinidad Limited’s (formerly FRAM Exploration Trinidad Limited) Inniss-Trinity field in Trinidad –
together the “Transaction”.
Key terms of the Transaction
· Predator will acquire 100% of the issued shares of T-Rex Resources (Trinidad) Limited (“T-Rex”), an indirectly wholly owned subsidiary of Challenger Energy that holds its 83.8% interest in, and is the operator of, the Cory Moruga licence.
· Gross consideration is US$9.0 million.
o US$3.0 million is payable to Challenger Energy by Predator in cash, in instalments as follows:
(i) US$1 million upon completion;
(ii) a further US$1 million 6 months after completion; and
(iii) a further US$1 million payable once Cory Moruga field production first reaches 100 barrels of oil per day.
o An agreed amount of US$6 million will be offset against the Gross Consideration to reflect the aggregate agreed value of:;
(i) T-Rex’s liabilities (including all contingent and potential liabilities, whether crystallised or not); and
(ii) The option value embedded in Challenger Energy’s back-in right (“Back-in Right”);
(iii) the repayment of all loans and debts owed or claimed to be owed by either party to the other in respect of the Inniss-Trinity CO2 EOR pilot project (recognising that absent a settlement between the parties, such amounts would be recoverable only from incremental production from the Inniss-Trinity CO2 EOR pilot project area), and
(iv) the mutual final settlement agreed between the parties in respect of all disputes and claims in relation to the Inniss-Trinity CO2 EOR pilot project.
Engagement Letter with Optiva Securities Limited (“Optiva”)
An Engagement Letter with Optiva has been executed by the Company regarding any potential M & A transaction with, or an investment by parties directly into, Predator Oil & Gas Trinidad Limited (“POGT”), a wholly owned subsidiary of the company, to gain specific exposure to CO2 EOR activities. Any such external investment specifically into POGT would allow this project to progress simultaneously with Predator’s other projects, while not diluting the value of those other projects.
Back-in Right for 25% Equity of Predator’s share of Cory Moruga
In relation to the Back-in Right, it may be exercised at Challenger Energy’s election:
o at any time in the period commencing three years after the completion date or first commercial production from Cory Moruga field (whichever is earlier) and ending six years after the completion date;
o If the Back-in Right is exercised, Challenger Energy will pay to Predator a fixed cash amount of US$2.25 million:
(i) plus a variable percentage of the costs incurred by Predator on the Cory Moruga field subsequent to the completion date;
(ii) the percentage dependent on the P50 Resource attributable to the Cory Moruga field at that time being:
a) 50% of costs incurred if the P50 Resource is less than 5 million barrels of oil (MMbbls);
b) 75% of costs incurred if the P50 Resource is more than 5 MMbbls but less than 10 MMbbls; and
c) 100% of costs incurred if the P50 resource exceeds 10 MMbbls.
Framework for CO2 EOR collaboration
· Predator and Challenger Energy have agreed to establish a collaboration in relation to CO2 EOR activities and projects in other areas in Trinidad, including but not limited to potential application of CO2 EOR techniques across Challenger Energy’s other fields ;
· Leveraging Predator’s expertise in CO2 EOR techniques and methodologies.
Completion
· Predator has until 31 January 2023 to complete confirmatory due diligence, prior to which time the parties will also work in good faith to enter into long-form transaction documentation in respect of the Transaction.
· Thereafter, completion of the Transaction will be conditional on consent to the Transaction being received from the Trinidadian Ministry of Energy and Energy Industries (“MEEI”), including agreement from MEEI to a revised work programme proposed by Predator:
(i) work programme to include technical work, CO2 EOR activity, and new well drilling in 2024;
(ii) a waiver by MEEI of past dues and claims in respect of Cory Moruga field, and a revision by MEEI of the basis of future licence fees applicable to the Cory Moruga licence.
The parties have agreed to work together to secure the required consents and approvals and achieve completion of the Transaction as soon as reasonably practicable on or before 30 May 2023, with a long stop date of 31 August 2023 after which either party may elect to terminate the agreement or they can mutually agree to an extension.
Independent Competent Persons Report (“CPR”)
The Company will commission a CPR on Cory Moruga in the coming weeks which is expected to be published before Completion.
Background
The Cory Moruga field in Trinidad was first identified by Predator as a prime candidate for CO2 EOR in 2017. An option to acquire Cory Moruga was outlined in the Company’s Prospectus published in 2018 at the time of admission to the Main Market but was later dropped when the Company elected to focus on the Guercif Licence in Morocco.
The Inniss-Trinity pilot CO2 EOR Project allowed the Company to develop valuable CO2 EOR operational expertise and for it to establish exclusivity in respect of using the surplus liquid CO2 supply in Trinidad for CO2 EOR operations with Massy Gas Products Limited (“Massy”).
The Cory Moruga field is under-developed as a result of which higher reservoir pressures have been maintained. This makes it relatively unique in Trinidad as it creates the possibility to execute a miscible CO2 EOR project to generate the potential to significantly increase the oil recovery factor.
Cory Moruga is covered by 3D seismic which shows less fault compartmentalisation relative to many other mature fields onshore Trinidad. It has never been water-flooded. This assists the development of a CO2 injection strategy to potentially maximise the effectiveness of the CO2 sweep through the reservoirs.
A small part of the Moruga West field extends into Cory Moruga. The ex-BP field continues to produce from the same Herrera reservoirs as have been encountered in Cory Moruga drilling to date. In 2017 the Company unsuccessfully bid for the Moruga West field, which was then owned by Massy. The geological understanding of the development and extent of the Herrera reservoirs in Moruga West has been invaluable in the Company’s assessment of the growth potential of the Cory Moruga asset.
Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented :
“We are delighted to have negotiated an amicable settlement with Challenger Energy – which gives a positive footing for both companies to move forward – and gives Predator access to the under-developed Cory Moruga field. Cory Moruga has always been recognised by the Company as a candidate for miscible CO2 EOR. Since 2017, when the Company first had an option to acquire it, WTI spot oil price has increased by 46% to improve CO2 EOR project economics.
It is important for our shareholders that the Company is seen to be leveraging its expertise in CO2 EOR techniques and methodologies developed as a consequence of executing the Inniss-Trinity CO2 EOR Project. This allows us to capture value for the Inniss-Trinity CO2 EOR Project that would otherwise have been unrealised. Cory Moruga creates another exciting growth opportunity for 2023 which the Company can operate entirely itself and can exercise direct control over the receipt of potential future production revenues.”
For further information visit www.predatoroilandgas.com
Follow the Company on Twitter @PredatorOilGas.
This announcement contains inside information for the purposes of Article 7 of the Regulation (EU) No 596/2014 on market abuse
For more information please visit the Company’s website at www.predatoroilandgas.com :
Enquiries:
Predator Oil & Gas Holdings Plc
Paul Griffiths Executive Chairman
Lonny Baumgardner Managing Director
Tel: +44 (0) 1534 834 600
