Roxi Petroleum Plc (AIM:RXP), the Kazakhstan focused exploration and production company, has announced a complex deal to sell part of its interest in the Galaz block to LG International (LGI). Roxi Petroleum is a small-cap oil exploration and production company listed on AIM in London. Its main assets are the BNG, Ravninnoe, Galaz, Beibars and Munailly blocks in Kazakhstan. Roxi has indicated that its strategy remains to focus on its existing assets to secure early production and to prove up reserves and at the same time, building successful partnerships from its recent farm-outs.
David Wilkes, CEO of Roxi Petroleum said:
“Completion of the Galaz agreement with LGI will mark a turning point for Roxi. Not only would we retain a meaningful interest in this producing asset, but we would secure substantial funding of its work programme commitments. This together with our recent completion of our farm out deals with Canamens puts Roxi in a strong position to develop its existing assets and achieve production by the end of the year.”
Prior to the agreement, Roxi held a 43.3% interest in the Galaz block. After the deal, it will receive $10m in cash and retain an indirect 34.2% interest of the Galaz block. Perhaps as importantly, LGI has also agreed to provide up to $26m of funding for appraisal and development work on the block.
In valuation terms, Roxi are giving up 9.1% of the block and receiving $10m in cash in return, valuing the whole block at some ~$110m. Thus, Roxi's remaining 34.2% stake would be worth $37.5m. Of course, Roxi also receives the $10m cash, so the combined value to Roxi of Galaz and the cash it receives is ~$47.5m, or nearly £30m. With 417m shares in issue, that is 7.1p/share.
LG will hold 40% of Galaz after the deal completes and presumably is confident it is going to make a return on its significant investment, so this may bode well for future success on the block and the final results of Well NK22.
For further research links related to Roxi Petroleum, please see http://roxi-petroleum.blogspot.com/
Disclosure of interest: The author holds shares in Roxi Petroleum.
