Prospex Energy PLC (AIM:PXEN) Completion of Selva Acquisition

Selva Gas Field is Scheduled to be in Production by Q2 2023

Prospex Energy PLC, the AIM-quoted investment company focused on European energy projects, is pleased to announce that it has completed the acquisition of the 20 percent share of the Podere Gallina licence which contains the Selva Gas Field in the Po Valley region of Italy. The Selva Gas Field is scheduled to come into production by Q2 2023.

Background

On 9 August 2021 Prospex signed a conditional Sale and Purchase Agreement (“SPA”) with AIM quoted United Oil and Gas plc (AIM:UOG) (“UOG”) and UOG Holdings plc (“UOG Holdings”), a wholly owned subsidiary of UOG), to conditionally acquire a further 20% working interest in the Podere Gallina Licence in the Po Valley region of Italy, via the acquisition of UOG Holdings’ subsidiary, UOG Italia S.r.l. (“UOG Italia”). Having secured the funding for the transaction from the Company’s Placing in February 2022, the final condition for closing the transaction was the approval by the Ministry of Ecological Transition (“MITE”) for the change of control of 100% of UOG Italia from UOG to Prospex. This was officially received on 4 April 2022. The Company has now paid UOG the balance of the consideration of €2,056,466 plus the working capital requirement accrued from the effective date of 1 January 2021 to 6 April 2022 of €134,500, a total of €2,190,966. UOG Italia has a 20% working interest in the Podere Gallina licence which contains the Selva Gas Field (“Selva”). Prospex now owns a 37% working interest in the Podere Gallina Licence, through its 100% ownership of UOG Italia and its pre-existing 17% share of the licence through its wholly-owned subsidiary PXOG Marshall Limited.

Completion of this transaction increases the Company’s share of Selva’s independently verified 2P gas reserves from 2.3 Bcf to 5.0 Bcf[1]. The other 63% participant in the licence and operator is Po Valley Operations Limited (“Po Valley”), a wholly-owned subsidiary of Po Valley Energy Limited (ASX:PVE).

The Selva Gas Field is scheduled to come into production by Q2 2023 from the suspended Podere Maiar-1 well which was drilled in December 2017. The next steps to first gas are: –

1. receipt of a full production licence from the Italian authorities which is expected in Q2 2022. On 21 January 2022, the INTESA (the agreement) for the Selva Malvezzi concession was sent by MITE to the Emilia Romagna Region (the Regional Government). This pre-award for the intergovernmental agreement is the penultimate step for the approval of the Production Concession. The final step is the award of the Production Concession. Once this is awarded the field development physical project activity can commence.

2. completion of the 12-month seismic environmental monitoring programme, which commenced in January 2021.

3. installation of an 800m 4-inch pipeline from the well head to the gas grid network operated by Snam Rete Gas S.p.A. (“SNAM”) in order to export the gas to market.

4. connection of the pipeline from the well to the SNAM gas grid network by SNAM. Procurement and engineering by SNAM for this activity commenced in December 2021.

Prospex is supporting the operator Po Valley to accelerate completion of these steps in order to achieve first gas prior to the current target of Q2 2023.

The Competent Person Report (“CPR”) for the Podere Gallina Licence (CGG Services (UK) Limited, January 2019) has the gross metrics for the Selva field as stated in the table below for proven plus probable (2P) reserves and the estimated gross NPV10 which was derived from approximate annual cash flows at a gas price of €0.2/scm flat. Net figures for the Company’s post-transaction equity interest of 37% are shown (being the 17% already owned by Prospex plus the 20% acquired in this transaction.)

The forward curve gas price from Q2 2023 is more than four times the CPR assumption from January 2019. A more than four-fold increase in predicted gas price increases both the NPV10 and the annual cash flow per annum proportionally by more than a factor of four. Taking into account capital and cost inflation since the January 2019 CPR, together with the effect of any increased taxes and royalties, n ew economics were run b y management, which show the Company’s net NPV10 and net cash flow to be approximately four times higher than the CPR economics at the forward curve gas prices.

Transaction Details:

· SPA signed on 9 August 2021 between Prospex, PXOG Marshall Limited (“the Buyer”), a wholly-owned subsidiary of Prospex and UOG Holdings to acquire 100% of UOG Italia for a total consideration of €2,164,701 subject to certain working capital adjustments. UOG Italia’s sole asset is its 20% working interest in the Podere Gallina Licence and the associated joint operating agreement. UOG Italia is a wholly-owned subsidiary of UOG Holdings.

· A deposit of €108,235, was paid on 10 August 2021, representing 5% of the total consideration. The balance of the consideration has now been paid on completion.

· The acquisition has an effective date of 1 January 2021 and completion was conditional upon:

o Regulatory approval of the change of ownership of UOG Italia;

o Prospex paying the balance of the consideration.

· MITE approved the change of control of UOG Italia on 4 April 2022 and the deed of transfer was executed in Rome on 8 April 2022.

· Further expenditure on the asset has been funded by all three co-venturers in the Podere Gallina licence proportionate to their working interests until completion at which point the 20% share of the working capital funded by UOG since 1 January 2021 will be added to the consideration. This sum has been agreed as €134,500 and has been added to the final consideration.

Mark Routh, Prospex’s CEO, commented:

“I am delighted to announce the completion of the Selva acquisition. This is a transformational deal for Prospex with the potential to significantly add to our revenue stream in a relatively short space of time.

“The 2019 CPR conducted on the Selva field, which we are estimating to be in production Q2 next year, concluded that the field is economic at a gas price of €0.2/scm. With the forward curve gas prices of more than four times this number and estimated to remain high, we are potentially looking at net annual cash flows from our revised share of the Selva gas production in excess of €8 million per year for the first five years of the ten-year production profile.

“Given the above, we are supporting the operator Po Valley to accelerate the last remaining steps to first gas, starting with the award of the production concession for Selva Malvezzi which is expected in Q2 2022.

“Once again, I would like to take this opportunity to thank our shareholders for their continued support and look forward to updating the market on our progress in due course”.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (“MAR”) and is disclosed in accordance with the Company’s obligations under Article 17 of MAR.

* * ENDS * *

For further information visit www.prospex.energy or contact the following:

Mark Routh

Prospex Energy PLC

Tel: +44 (0) 20 7236 1177


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