TIDMIGAS
RNS Number : 9959G
Igas Energy PLC
10 March 2015
10 March 2015
IGas Energy plc
("IGas" or the "Company" or the "Group")
UK Shale Farm out Agreement with INEOS Upstream Limited
("INEOS")
IGas Energy plc (AIM:IGAS) is pleased to announce it has signed
a Farm out and Purchase Agreement ("FOPA") with INEOS. On
completion of the transaction, INEOS will acquire an interest in
certain licences in the North West and East Midlands and the
Group's participating interest in the acreage held under PEDL 133
in Scotland. The consideration for IGas' participating interests
comprises GBP30 million cash payable to IGas on completion and a
funded forward work programme of up to GBP138 million gross, of
which IGas' share to be funded fully by INEOS, is expected to
amount to approximately GBP65 million.
Highlights:
-- In the North West, INEOS will acquire a 50% interest in IGas'
licences: PEDL, 147, 184, 189, and 190, and a 60% interest in IGas'
licences: PEDL 145, 193 and EXL 273 (collectively, the "Bowland
Licences");
-- In the East Midlands, INEOS has the option to acquire 20% in PEDL 012 and 200
-- In Scotland, INEOS will acquire IGas' entire working interest
in the acreage held under PEDL 133 in the Midland Basin and assume
operatorship;
-- At completion INEOS will pay IGas a cash sum of GBP30 million;
-- INEOS to fund a two phase carried work programme of up to
GBP138 million of which IGas' share of the gross carry is expected
to be approximately GBP65 million. Upon commencement of commercial
production from the Bowland Licences, IGas would be obligated to
pay back to INEOS its net share of the carry out of 50% of its net,
free cashflow;
-- At completion, INEOS will become the operator of PEDLs 145,
193 and EXL 273 subject to normal partner approvals;
-- IGas will have up to $285 million of total spend from third
parties across its key shale gas acreage from major partners,
including Total E&P UK Limited ("Total"), GDF SUEZ E&P UK
Limited ("GDF") and INEOS; this will give IGas a significant,
funded work programme including 15 wells, flow tests and gas
handling stations;
-- On completion, the cash component of the consideration will
further strengthen the Group's balance sheet giving IGas additional
financial flexibility and ability to further develop its onshore
licence interests.
Commenting Andrew Austin, CEO of IGas, said:
"We are delighted to announce this farm out with INEOS which
underpins the quality, scale and significant potential of our
licences, whilst retaining material upside in these key assets.
Alongside the commitment from our existing partners, INEOS's
commitment of upfront cash and considerable capital investment will
help fund us through the next steps of our shale appraisal and
production programme.
This transaction, together with our existing partnerships with
Total and GDF, reinforces the potential and materiality of our
portfolio to world class counterparties and strongly positions us
as we seek to work together to unlock the potential of our untapped
natural gas resources in Britain."
Gary Haywood, CEO of INEOS Upstream, says
"This is a great opportunity to acquire some first class assets
that have the potential to yield significant quantities of gas in
the future. INEOS believes that an indigenous Shale gas industry
will transform UK manufacturing, and that we can extract the gas
safely and responsibly. We are pleased to have agreed this deal
with IGas. INEOS's scale, asset position across the UK, US shale
gas expertise, and our expertise in managing oil and gas facilities
will be a great match with IGas's existing onshore asset base, and
significant exploration and production capability."
Jefferies acted as Financial Advisor to IGas on the
transaction.
ENQUIRIES
For further information please contact:
IGas Energy plc
Tel: +44 (0)20 7993 9899
Andrew Austin, Chief Executive Officer
Stephen Bowler, Chief Financial Officer
Ann-marie Wilkinson, Head of Communications
Jefferies International Limited (NOMAD and Joint Corporate
Broker)
Tel: +44 (0)20 7029 8000
Sara Hale
Graham Hertrich
Canaccord Genuity (Joint Corporate Broker)
Tel: +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor
Vigo Communications
Tel: +44 (0)20 7016 9570
Patrick D'Ancona/Chris McMahon
Details of the transaction
INEOS has agreed to farm into a 50% interest in IGas' licences
in the Bowland basin: PEDL, 147, 184, 189, 190; and a 60% interest
in IGas' licences: PEDL 145, 193 and EXL 273, (the "Bowland
Licences"), in the North West of England. In the East Midlands,
INEOS has the option to acquire 20% in PEDL 012 and 200.
INEOS will assume operatorship of licences PEDL 145, PEDL 193
and EXL 273. IGas will retain operatorship of all other Bowland
Licences.
INEOS will acquire IGas' entire working interest in the acreage
held under PEDL 133 in the Midland Basin in Scotland and assume
operatorship. INEOS has agreed to pay IGas an upfront cash
consideration of GBP30 million payable on completion of the
transaction.
INEOS has committed to agree to fund IGas' share of a forward
work programme on the Bowland Licences subject to a gross
expenditure cap of GBP138 million.
The Carry will be split into two distinct phases. Phase 1 shall
commence upon execution of the FOPA. Over Phase 1, INEOS is
committed to fund a work programme subject to a gross expenditure
cap of GBP70 million. Phase 2, which will be subject to a gross
expenditure cap of GBP68 million, shall follow Phase 1 of the
agreed work programme. At the end of Phase 1 INEOS must either
commit to the Phase 2 carry or return the licences to IGas.
The work programme is comprised as follows: Phase 1 - three
vertical wells, one hydraulically fractured vertical well, two
hydraulically fractured horizontal wells, gas processing and tie-in
costs and both 2D and 3D seismic surveys. Phase 2 - two vertical
wells, three hydraulically fractured horizontal wells, gas
processing and tie-in costs and a 3D seismic survey.
On commencement of production from the Bowland Licences and at
the point when IGas achieves positive free cash flow from these
licences, IGas will be required to repay its net share of the carry
to INEOS. Positive free cash flow being gross revenues less costs
including operating costs, accrued taxes, capital expenditure,
third party transportation and processing fees and third party
sales and marketing costs. IGas will repay the carry plus an
increment (currently estimated at 6% per annum), out of a maximum
of 50% of its net, free cashflow from the Bowland Licences. The
free cash flow payment amount is subordinated to all liabilities of
IGas pursuant to the Bond Security.
Completion is expected to take place not later than 30 June
2015.
The transaction is subject, inter alia, to partner pre-emption
rights and consents and approvals by the Department of Energy and
Climate Change and relevant tax clearances.
There is no production from the assets included in this
transaction that contribute to the overall EBITDA of the Group.
On completion, IGas will have a gross funded carried work
programme of up to $285 million, covering the cost of around 15
wells, flow tests and gas handling stations.
Asset Overview
Licences subject to transaction
IGAS CURRENT IGAS POST DEAL
Licenses Region Partner Equity Operator Partner Equity Operator
--------------- --------- ------- --------- ---------- ------- ---------
% %
--------------- --------- ------- --------- ---------- ------- ---------
PEDL012 East Midlands GDF 75% IGas GDF/Ineos 55% IGas
--------------- --------- ------- --------- ---------- ------- ---------
PEDL200 East Midlands GDF 75% IGas GDF/Ineos 55% IGas
--------------- --------- ------- --------- ---------- ------- ---------
PEDL189 North West GDF 75% IGas GDF/Ineos 25% IGas
--------------- --------- ------- --------- ---------- ------- ---------
PEDL145 North West 100% IGas Ineos 40% Ineos
-------------------------- ------- --------- ---------- ------- ---------
PEDL184 North West 100% IGas Ineos 50% IGas
-------------------------- ------- --------- ---------- ------- ---------
PEDL190 North West 100% IGas Ineos 50% IGas
-------------------------- ------- --------- ---------- ------- ---------
PEDL193 North West 100% IGas Ineos 40% Ineos
-------------------------- ------- --------- ---------- ------- ---------
EXL 273 North West GDF 75% IGas GDF/Ineos 15% Ineos
--------------- --------- ------- --------- ---------- ------- ---------
PEDL147 North West GDF 75% IGas GDF/Ineos 25% IGas
--------------- --------- ------- --------- ---------- ------- ---------
PEDL133
Higher horizon Scotland 100% IGas Ineos 0% Ineos
-------------------------- ------- --------- ---------- ------- ---------
Lower horizon Scotland 49% IGas Ineos 0% Ineos
-------------------------- ------- --------- ---------- ------- ---------
Other licences
IGAS CURRENT IGAS POST DEAL
Licenses Region Partner Equity Operator Partner Equity Operator
--------------- -------------- ------- --------- ------------- ------- ---------
% %
--------------- -------------- ------- --------- ------------- ------- ---------
AL9 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
EXL 288 East Midlands GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
ML3 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
ML4 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
ML6 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
ML7 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
Total Total
Egdon Egdon
PEDL139 East Midlands ECorp 32.5% IGas ECorp 32.5% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
Total Total
Egdon Egdon
PEDL140 East Midlands ECorp 32.5% IGas ECorp 32.5% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL146 East Midlands GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL173 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL174 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL178 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL179 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL207 East Midlands GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL210 East Midlands GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL6 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PL 162 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL169 East Midlands Egdon 80% IGas Egdon 80% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PL178 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PL179 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
East Midlands 100% IGas 100% IGas
------------------------------- --------- ------- --------- ------------- ------- ---------
PL199 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PL220 East Midlands 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
East Midlands 100% IGas 100% IGas
------------------------------- --------- ------- --------- ------------- ------- ---------
PEDL185 North West GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL188 North West GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL186 North West GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL187 North West GDF 75% IGas GDF 75% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PEDL40 North West 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL56 North West 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL78 North West 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
P1270 Scotland 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL 163 Scotland 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL158 Scotland 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL159 Scotland 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
DL2 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
DL4 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
ML18 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
ML21 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL21 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL233 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PEDL235 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
Aurora, Aurora,
Brigantes, Brigantes,
Corfe, Corfe,
Egdon, Egdon,
PEDL70 Weald UKOG 50% IGas UKOG 50% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PL182 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PL205 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PL211 Weald UKOG 90% IGas UKOG 90% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PL233 Weald UKOG 50% IGas UKOG 50% IGas
--------------- -------------- ------- --------- ------------- ------- ---------
PL240 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
PL249 Weald 100% IGas 100% IGas
------------------------------- ------- --------- ------------- ------- ---------
About INEOS
INEOS is a global manufacturer of petrochemicals, speciality
chemicals and oil products. It comprises 15 businesses each with a
major chemical company heritage. It has a turnover of $54bn. Its
production network spans 65 manufacturing facilities in 16
countries throughout the world, employing 17000 people. INEOS
products make a significant contribution to saving life, improving
health and enhancing standards of living for people around the
world. Its businesses produce the raw materials that are essential
in the manufacture of a wide variety of goods: from paints to
plastics, textiles to technology, medicines to mobile phones -
chemicals manufactured by INEOS enhance almost every aspect of
modern life. INEOS is one of the UKs largest manufacturing
businesses. It employs 4000 people in the UK across 7 sites. It can
use shale gas at its manufacturing sites as a feedstock or energy
source. The company also owns land, pipelines and storage in some
of the key areas being explored in the UK.
INEOS Upstream is INEOS' new oil and gas exploration and
production business. It has the stated aim to become the biggest
player in the UK Shale gas industry. Shale gas could revolutionise
UK manufacturing as it has done in the USA. There is incredible
potential to provide the UK with greater energy security, growth
and jobs, and help the UK's chemical and energy-intensive UK
manufacturing industry to succeed, worldwide.
For further information please visit www.ineos.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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