Mayan Energy Ltd: Acquisition and Issue of Equity

Posted by OilVoice Press - OilVoice


Mayan Energy announce acquisition of 12 further wells on producing Texan oil field and a successful raise of £850,000 via an oversubscribed placing.

Mayan (AIM: MYN), the AIM listed oil and gas company, is pleased to announce that it has entered into a conditional Sale and Purchase Agreement to acquire interests in 12 well bores, including seven additional vertical wells at the Stockdale Field in Wilson County, and three horizontal and two vertical Austin Chalk wells in Wilson and Gonzalez Counties, Texas (the “Acquisition”) for a total consideration of US$605,000 (the “Consideration”). Completion is conditional on the completion of full due diligence and Mayan and the Vendor entering into a Joint Operating Agreement (“JOA”).  The Acquisition is in line with Mayan's objective to increase net production to 300 – 500 bopd by securing select under-exploited US onshore assets at attractive prices and enhancing production by applying the Company's in-house expertise and advanced technologies and techniques.  The Company will update investors when the Acquisition has closed.

In addition, the Company also announces that it has raised £850,000 gross via a Placing with a limited number of high net worth investors (the "Placing") of 141,666,666 new ordinary shares of no par value each (the "Placing Shares") at a price of 0.6p per share (the "Placing Price") with a warrant for every 2 shares subscribed exercisable at 0.9p (the “Placing Warrants”).    The Placing Price represents a discount of 11.8% to the last closing price on 22 June 2018. The net proceeds of the Placing will be used to fund the Consideration, new work-overs at Stockdale and Austin Chalk, and general working capital.  The Placing was arranged by Mayan and Novum Securities Limited (“Novum”) who have been appointed as broker to replace Cornhill Securities following this Placing.  In addition to the Placing, Mayan has also agreed to issue US$175,000 of new ordinary shares at a price of 0.7p per share in settlement of outstanding creditors ('Settlement Shares').

Acquisition of seven vertical Stockdale wells and five Austin Chalk wells

7 Stockdale Wells (Working Interest 60%/ Net Revenue Interest 45%)

  • Provides multiple opportunities to replicate the success of the Morris#1 well at the Stockdale field which has been producing at a gross rate of over 80bopd following a low cost workover
  • Production at Stockdale is highly profitable due to low operational costs which at current oil prices generates excellent netbacks
    • All-in operating costs at Morris#1 are expected to average less than US$14 per barrel based on an expected production level of 2,760 gross BOPD over a 30-day month
  • Low cost development programme will involve reworking Stockdale wells using the techniques and technologies that were successfully deployed on the Morris #1 well 
    • All seven vertical wells will be completed in both upper and lower Anacacho zones as well as the lower Escondido sand where the Morris#1 encountered natural gas
    • Water to be piped into existing salt water disposal well (“SWD”)
    • Due to work previously undertaken by Mayan to get the SWD well operational it will be able to quickly workover and tie-in production from new wells  
5 Austin Chalk Wells (Working Interest 60%/ Net Revenue Interest 50.25%)
  • Near term workover and exploitation potential on three Austin Chalk horizontal wells and two vertical wells using low-cost techniques proven on Morris #1 well
  • The Company intends to use a coiled tubing rig to clean out; work-over; and, acidize Austin Chalk zone in each of the horizontal laterals with estimated potential production of 60-80 barrels per day per well
  • The Company estimates that the workover and acidization procedure on each well will require no more than two days rig time allowing for near term, high impact results to be realized
  • Longer-term potential to re-frac wells targeting zones identified with the Roke Quad Neutron log tool
  • None of the wells have been re-entered or stimulated in any way suggesting significant upside potential from low cost stimulation and production enhancement techniques and technologies
  • The Company has established a 300 bopd (Gross) target from the five well package with potential for upside if the Company achieves the higher end of its expectation range on each well
  • Operating cost per barrel estimated to be US$18-20 per barrel as water from these wells will be transported via truck for disposal

Update on Forest Hill Field work programme

  • Workovers on an additional 2 - 4 producing wells at Forest Hill Field due to recommence in July 2018 – follows satisfactory resolution of issues relating to access and rights regarding certain leases with a neighbouring operator 
  • Production at Forest Hill is highly profitable due to low costs which at current oil prices generates excellent netbacks
    • Realised oil price is WTI plus US$2.00  
    • All-in operating costs are expected to average less than US$15 per barrel of oil based on an expected production level of 5,730 gross BOPD over a 30 day month

Eddie Gonzalez, Managing Director, said: "Whilst the SPA remains conditional on the agreement of the JOA and completion of due diligence, Mayan is confident of closing the Acquisition given its knowledge of the formations and work done to date on the Transaction. With the potential addition of these 12 new wells plus ongoing work programmes at Forest Hill and now at Zink Ranch we are well positioned to push daily production towards our target range of 300 to 500 net bopd.  Our technical team has successfully demonstrated the capability to achieve excellent results by exploiting existing well bores using cutting-edge and proprietary tools and techniques. Thanks to today's agreement, our team now has many more opportunities to replicate this success. I expect Stockdale and the nearby Gonzalez County wells to form the backbone of our production, augmented by important contributions from Forest Hill and Zink Ranch. 

“Importantly following my appointment, Mayan today is a streamlined organisation with low overheads.  Together with our growing production base, we are able to deploy the majority of our new capital into the ground to add yet more production and in turn drive Mayan's profitability and future growth.  We now have an inventory of wells with which to take the next major step forward in terms of building the scale an oil and gas company requires to be successful over the long term.  With work progressing across our asset base, the summer and the fall of 2018 will not be short of high impact news flow.”

Sale and Purchase Agreement (“SPA”)

Mayan has conditionally entered into the SPA with Smart Bit LLC, a limited liability company incorporated in the US state of Wyoming.  The terms of the SPA, which is subject to completion of full due diligence and entering into a Joint Operating Agreement (“JOA”), are as follows:

  • US$40,000 in cash within seven days of execution of the SPA
  • Closing of transaction within 30 days subject to satisfaction or waiving of the following Condition Precedents:--
    • Verification of the Stockdale Lease package and the Austin Lease package, including Material Contracts, title information, operating agreements, well files, geologic data, and environmental information as may currently exist
    • Execution of a mutually agreed upon JOA based on the AAPL Model JOA Form 610 with appropriate Exhibits
    • Delivery by Smart Bit of an Assignment of leases
  • US$565,000 at Closing in the form of 50% cash and 50% ordinary shares of Mayan Energy Limited issued based on the seven day volume weighted average price prior to Closing
  • Smart Bit LLC and Mayan to fund their respective working interests for capital costs on the wells which are estimated at totaling approximately US$410,000 net to Mayan for the 12 well programme.

The Placing

Mayan has raised gross proceeds of £850,000 through the placing of 141,666,666 Ordinary Shares at the Placing Price.  The Placing is conditional on Admission and application will be made for the Placing Shares, which will rank pari passu with the existing Ordinary Shares, to be admitted to trading on AIM (the "Admission"). 

Placing Warrants

Mayan has issued 70,833,333 Placing Warrants to subscribers in the placing exercisable at 0.9p per ordinary share for a period of two years from the date of issue.

Broker Warrants

Mayan has issued 9,916,666 broker warrants exercisable at the placing price of 0.6p per ordinary share for a period of two years from the date of issue.

Issue of Equity to Creditors

Issue of 18,782,869 Ordinary shares to creditors to settle amounts owed and certain advisors at the Placing Price (the "Settlement Shares").

Total Voting Rights ("TVR")

In total 160,449,535 Ordinary shares will be issued at the Placing Price, and it is expected that Admission will become effective and dealings in the Placing and Settlement Shares will commence on or around July 6th 2018. 

Following the issue of the 141,666,666 Ordinary Shares and the 18,782,869 Settlement Shares, the Company's issued share capital will consist of 1,383,385,465 Ordinary Shares with voting rights.  No Ordinary Shares are held in treasury at the date of this announcement and therefore following the Admission, the total number of Ordinary Shares in the Company with voting rights will be 1,383,385,465.

The above total voting rights figure may be used by shareholders as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in the Company.

Special note concerning the Market Abuse Regulation

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 ("MAR").  Market soundings, as defined in MAR, were taken in respect of the Placing, with the result that certain persons became aware of inside information, as permitted by MAR.  That inside information is set out in this announcement.  Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to Mayan and its securities. 

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Mayan EnergyAcquisitionEquity IssueAIMOilgasTexasOil FieldUnited StatesUSWells

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