Posted by Malcolm Graham-Wood - Malcy's Blog
Zenith has announced that it has entered into an option to purchase with binding exclusivity an oil production asset located in Indonesia. The proposed acquisition envisages Zenith acquiring a 100% WI in an oil production licence which contains two onshore blocks totalling 65 sq kilometres. The licence produces in excess of 1,000 b/d which is transported into the national sales system at an all in cost of $18 pb. The production comes from just one oilfield and the second field is ‘expected to be capable of significant production by drilling new wells and performing work overs on existing wells.
The company are now undertaking due diligence after which it has 15 days to exercise an option to complete the acquisition for $6,600,000 payable in two halves. As to funding the purchase Zenith is considering ‘ a number of funding options' including debt and equity. It is clear that Zenith are moving ahead with their oft stated intention to acquire value accretive properties to ‘enrich its portfolio' and this certainly looks to fit the bill. Indeed it looks like this potential deal is cheaper and easier to produce than in Azerbaijan so should complement the programme there. Having over 2,000 b/d from the region by 2020 will undoubtedly make Zenith quite a force and considerably add value for shareholders. Indeed, Indonesia is fast becoming the preferred post code for companies looking to add efficient barrels to their portfolios.
It is near enough April Fools Day to check ones calendar as PVR announce a modest farm-out of the Barryroe field to a Chinese consortium who will fund 100% of three wells and associated side tracks. This will be funded by way of a non-recourse loan secured against future Barryroe production plus warrants at 12p and if completed will be in Q3 2018. Unusually I have had no comment from Tony O'Reilly, when I have I will add more but this deal is by no means a clean farm-out by traditional standards and lack of comment from TOR is worrying.
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