TIDMGENL TIDMHOIL
RNS Number : 4130K
Genel Energy PLC
21 August 2012
21 August 2012
Genel Energy plc
("Genel Energy" or the "Company")
Genel to acquire additional interest in the Miran Block and
assume joint operatorship
Genel Energy announces that it has agreed to acquire an
additional 26 per cent interest in the Miran exploration block in
the Kurdistan Region of Iraq (the "Miran Block") from Heritage
Energy Middle East Limited ("HEME"), a wholly owned subsidiary of
Heritage Oil Plc ("Heritage"), for $156 million (the
"Acquisition"). In addition, Genel Energy will provide a bilateral
loan of $294 million to Heritage, secured on Heritage's shares in
HEME as well as HEME's remaining working interest in the Miran
Block (the "Loan"). Either party to the Loan can elect that,
subject to receipt of approval from Heritage's shareholders, the
Loan is repaid through the transfer to Genel Energy of Heritage's
entire holding of shares in HEME rather than in cash. Both the
Acquisition and the Loan will be funded and serviced from the
Company's existing cash resources. As part of the Acquisition,
Genel Energy will become joint operator of the Miran Block.
Transaction rationale
-- The Acquisition allows Genel Energy to increase its interest
in the Miran Block a commercial gas discovery, from a 25 per cent
working interest to a 51 per cent working interest (38.5 per cent
working interest post KRG back-in right)
-- It progresses Genel Energy's strategy of consolidating the
leading position in the Kurdistan Region of Iraq
-- It leverages Genel Energy's strong operating and development
experience in a region where the Company has extensive geological
knowledge
-- A competent person's report prepared by RPS Energy
Consultants Limited as at 31 March 2012 for Heritage, estimates
that the block contains mean Gas In Place of 10.5 Tcf with mean
contingent and risked prospective resources of 3.75tcf of gas and
161 mmboe of liquids
-- Together with the Company's recent acquisition of a 44%
interest in the Bina Bawi gas discovery, it allows Genel Energy to
create a material gas position in the Kurdistan Region
-- Assuming joint operatorship of the Miran Block will allow the
Company to take the lead in driving the development of the Miran
Block forward to meet the growing needs of the domestic and Turkish
markets
Commenting on the transaction, Tony Hayward, Chief Executive
Officer of Genel Energy, said:
"This acquisition represents an excellent opportunity to extend
our interest in, and assume joint operatorship of, a commercial gas
discovery and high quality asset in the Kurdistan Region of Iraq.
Following our recent acquisition of a 44% interest in Bina Bawi, it
will further enhance our position as the leading oil and gas
company in Kurdistan. We believe that as an Anglo-Turkish company
we are uniquely placed to execute the full field development of the
Miran Field including gas exports to Turkey and we aim to build a
material gas business alongside our existing oil business in the
medium term. Our belief in the significant potential of the region
is stronger than ever and we aim to continue to play a leading role
in the consolidation and development of the oil and gas sector in
Kurdistan."
-ends-
For further information, please contact:
Genel Energy plc
Julian Metherell
Natalie Fortescue + 44 20 7659 5100
M: Communications
Patrick d'Ancona
Andrew Benbow +44 20 7920 2330
Principal terms
The Acquisition
Genel Energy will acquire 26 per cent. from HEME, and become the
joint operator of the Miran Block with, Heritage. As consideration
for the Acquisition, Genel Energy will pay to HEME a cash sum of
$156 million, adjusted to reflect any cash calls made in respect of
the Miran Block since 1 July 2012. Additionally, at the request of
the Kurdistan Regional Government ("KRG"), on completion of the
Acquisition the Company has agreed to donate $30 million of local
community and infrastructure projects over the next 3 years.
On completion of the Acquisition, which is subject to various
consents, approvals and assurances, including from the KRG and
Heritage's existing lending banks, Genel Energy will hold a 51 per
cent working interest in the Miran Block, and HEME will hold a 49
per cent working interest. The KRG will retain a back-in right for
a 25 per cent. working interest which is exercisable until the date
falling 180 days from a commercial discovery and which will, if
exercised, reduce the working interests of the contractors
accordingly.
Genel Energy and Heritage have agreed to establish a new joint
venture company for the purposes of managing the Miran Block, to be
held between them pro rata to their working interests in the field.
Heritage will transfer the operatorship of the Miran Block to the
new vehicle within 60 days of the Acquisition completing.
All present and future payment obligations and liabilities of
HEME under the Acquisition have been unconditionally and
irrevocably guaranteed by Heritage.
Loan
In addition, Genel Energy will enter into a $294 million
bilateral loan with Heritage. The Loan will be made on standard
commercial terms and will be secured against both Heritage's
interest in the share capital of HEME, a company wholly owned by
Heritage and Heritage's working interest in the Miran Block which
is held through HEME. Initial interest under the Loan is 8 per cent
per annum, and the Loan will have a fixed term ending on the date
which is the earlier of: (i) 15 months after the date of the
completion of the proposed acquisition by Heritage of an interest
in OML 30 in Nigeria, and (ii) 6 February 2014.
The Loan will permit either party to elect that the repayment is
satisfied through the transfer to Genel Energy of Heritage's entire
holding of shares in HEME, instead of repaying the outstanding
facility amount in cash. Any transfer by Heritage of HEME shares in
settlement of the Loan shall be subject to the approval of the
Heritage's shareholders in a general meeting. Heritage has
undertaken to convene a general meeting of its shareholders within
65 days of either party electing repayment of the Loan through the
transfer of HEME shares. In the event that shareholder approval is
not provided, the interest rate on the Loan shall increase by a
further 4 per cent per annum for the duration of the term, and
Heritage shall be required to pay a break fee to Genel of $6.6
million.
Under the terms of Heritage's existing facilities, Heritage
could only enter into the Loan with the consent of the banks under
its existing facilities. Therefore, Genel Energy agreed with
Heritage's existing financiers that Heritage will not repay in cash
any principal amount of the Loan to Genel Energy (other than
through enforcing Genel Energy's security over the Loan if there is
a default) for a limited period of time. The period of such
subordination is expected to end in early November. Genel Energy
will in any event have a right to require repayment of the Loan in
cash if Heritage's shareholders do not approve repayment of the
Loan through the transfer of shares in HEME. Notwithstanding the
above, Heritage remains free to pay interest, the break fee
(subject to compliance with the UKLA rules) and to proceed with
repayment of the Loan through the transfer of Heritage's entire
holding of shares in HEME.
Information on the Miran Block
The Miran Block covers approximately 1,105 square metres in the
southern part of Kurdistan. The Miran structure lies approximately
65 kilometres from the Kirkuk oilfield and 60 kilometres from the
Taq Taq field.
The Miran Block contains two large contiguous structures, Miran
West and Miran East. 2D seismic data acquired by Heritage in 2008
identified the two structures which together cover approximately
one third of the entire licence area. Well results have established
that the Miran Block contains two hydrocarbon systems with oil in
the shallower Upper Cretaceous section and gas/condensate within
the deeper Lower Cretaceous and Jurassic formations.
Work programme to date
The drilling campaign commenced in December 2008 and since then
four wells have been drilled on Miran West. Miran West-1 tested
approximately 3,000 bopd of 15 API oil from the Cretaceous
Shiranish formation at a depth of approximately 800 metres. Miran
West-2 tested three separate intervals in the Jurassic at an
average rate of approximately 25 MMcfpd and a condensate gas ratio
of 7bbl/MMcf. Miran West 3 reached the primary target of the
Jurassic gas reservoir and well testing operations within the main
Jurassic reservoir were successfully completed In May 2012. It
resulted in a constrained flow of up to 22 MMscf/d of wet gas with
a yield of 20 bbl/MMscf of 55˚ API condensate. The well has been
suspended pending re-entry and completion as a production well.
Miran West-4 commenced drilling on 21 June 2012 and reached target
depth on the 16 July. The well was drilled to a target depth of
1,905 metres and is designed to further appraise the Upper
Cretaceous oil reservoir.
Drilling of the Miran East-1 exploration well commenced in March
2012, with an estimated target depth of c.4,000 metres. The well is
targeting exploration potential within the Cretaceous and Jurassic
reservoir intervals of the Eastern structure. The well is currently
at 3,700 metres in the main Jurassic reservoirs and is on schedule
to reach target depth by November. Oil shows encountered while
drilling in the Upper Cretaceous are consistent with wireline log
interpretation indicating the presence of hydrocarbons and pressure
data indicates that the structure is in communication with the
existing discovery.
Development of the Miran Block and the Turkish Gas market
The Miran Block is a commercial discovery and independent
engineering studies have confirmed the potential for a
fast-tracked, phased development of the field.
Options being considered include early gas production to
existing and planned cement and power plants for local markets in
Kurdistan, as well as exports to Turkey under full field
development. The KRG has outlined favourable development options
for gas utilisation. The initial priority will be to satisfy local
gas demand by supplying gas on commercial terms to local cement
plants and power stations and other end-users in the Sulymaniyah
region in 2013.
The early production will be paralleled with full field
development and the export of gas to Turkey with the full
production of blended oil and condensate.
The consumption of natural gas in Turkey started in 1987. Since
then, consumption has grown rapidly and reached 46 bcm in 2011.
Turkey has the highest growth rate in all of Europe and Eurasia.
According to estimates produced by the Turkish state company BOTAS
and the World Bank, Turkey's consumption of natural gas is expected
to grow in the coming years and exceed 50 bcm by 2015. These
estimates correspond to a forecast 9% annual growth in domestic
demand.
Turkey has few proven reserves and consequently little domestic
production. Given the imbalance between domestic supply and
consumption of primary energy, Turkey is a large and net importer
of energy products, in particular oil and natural gas. Turkey is
one of the world's top importers of natural gas mostly for domestic
consumption. Currently Turkey imports the majority of its natural
gas from Russia, Iran and Azerbaijan through the pipeline network
and imports LNG from Algeria, Nigeria and the spot LNG market. The
Turkish Goverment is acively seeking to diversify its supply.
This announcement does not constitute or form part of any offer
or invitation to purchase, otherwise acquire, issue, subscribe for,
sell or otherwise dispose of any securities, nor any solicitation
of any offer to purchase, otherwise acquire, issue, subscribe for,
sell or, otherwise dispose of, any securities.
This announcement is not an offer of securities for sale or a
solicitation of an offer to purchase securities. The securities of
the Company referred to herein have not been and will not be
registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered or sold in the United
States unless they are registered with the U.S. Securities and
Exchange Commission or an exemption from the registration
requirements of the Securities Act is available.
The release, publication or distribution of this announcement in
certain jurisdictions may be restricted by law and therefore
persons in such jurisdictions into which this announcement is
released, published or distributed should inform themselves about
and observe such restrictions.
Certain statements in this announcement are forward--looking
statements which are based on the Company's, expectations,
intentions and projections regarding its future performance,
anticipated events or trends and other matters that are not
historical facts. These statements are not guarantees of future
performance and are subject to known and unknown risks,
uncertainties and other factors that could cause actual results to
differ materially from those expressed or implied by such
forward--looking statements. Given these risks and uncertainties,
prospective investors are cautioned not to place undue reliance on
forward--looking statements. Forward--looking statements speak only
as of the date of such statements and, except as required by
applicable law, the Company undertakes no obligation to update or
revise publicly any forward--looking statements, whether as a
result of new information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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