REG - Caspian Sunrise plc - Proposed Sale of the BNG shallow structures

Caspian SunriseAnnouncement

14/05/2024 07:00

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RNS Number : 2337O  Caspian Sunrise plc  14 May 2024

14 May 2024

 

Caspian Sunrise PLC

 

("Caspian Sunrise", the "Group" or the "Company")

 

Proposed Sale of the BNG shallow structures for $83 million

 

 

Introduction

The Board of Caspian Sunrise is pleased to announce it has entered into an
agreement to grant exclusivity to Absolute Resources LLP ("Absolute
Resources") a Kazakh registered company, in connection with the proposed
conditional sale of the MJF and South Yelemes structures at the BNG Contract
Area for a consideration of $83 million ("Proposed Disposal").

 

The exclusivity period extends to 8 August 2024. Caspian Sunrise and Absolute
Resources intend to move quickly to a conditional sale and purchase agreement
("SPA") incorporating the key commercial principles set out in the exclusivity
agreement, which would be subject to regulatory and shareholder consent. Until
a binding agreement has been entered into and its conditions been met there
can be no certainty a sale will complete.

 

Under the proposed terms set out in the exclusivity agreement, the Group would
continue to hold the licences for what the Board considers to be the much more
valuable deep structures at the BNG Contract Area.

 

Commercial rationale

The Board believes that the Group has a competitive advantage in the
identification and acquisition of new projects in Kazakhstan, which it does
not necessarily have to the same degree in the day to day operation of
maturing assets.

 

Also, with production expected from both Block 8 and West Shalva later this
year, the Board believes that now is a good time to consider offers on the
shallow structures at the BNG Contract Area.

 

Accordingly, in the opinion of the Board, the funds released from the sale of
the MJF and South Yelemes structures could be better utilised elsewhere to
enhance longer term shareholder value.

 

Background

Caspian Sunrise owns 99% of BNG Ltd LLP, the Kazakh entity which holds all the
licences issued to develop both the shallow and deep structures at the BNG
Contract Area. BNG Ltd LLP has granted Absolute Resources an exclusivity
period up to 8 August 2024 to conclude its due diligence in connection with
its proposed acquisition of a new corporate entity which would hold the
licences for the shallow MJF and South Yelemes structures on the BNG Contract
Area.

 

The MJF structure is the principal shallow structure on the BNG Contract Area.
Since first oil in 2016 it has produced more than 4 million barrels, thereby
providing the bulk of the funding for the development of the rest of the
Group.

 

In 2023 the MJF structure produced 576,368 barrels of oil at an average of
1,579 bopd representing approximately 87% of total production from the BNG
Contract Area. MJF production is currently approximately 1,350 bopd.

 

The first wells were drilled on the South Yelemes structure during the Soviet
era, with test production commencing in 1994.

 

The South Yelemes structure has four operational wells from which in 2023
approximately 88,746 barrels were produced at an average of 243 bopd
representing approximately 13% of total production from the BNG Contract Area.
The recent focus at South Yelemes has been preparation for and drilling of
horizontal side tracks from the existing wells, targeting the shallow dolomite
intervals. South Yelemes production is currently approximately 250 bopd.

 

Proposed disposal terms

The exclusivity agreement sets out that Absolute Resources would acquire a new
entity to be established to own the licences for the MJF and South Yelemes
structures. This new entity would not include Airshagyl and Yelemes Deep the
two deep structures at the BNG Contract Area.

 

The headline consideration less the amount then outstanding for the assessed
Historic Costs (which are currently approximately $17 million but would be
expected to be nearer $15 million by the likely date of completion) would be
payable in cash, on satisfaction of all the SPA conditions with Absolute
Resources assuming responsibility for the payment of the balance of the
assessed Historic Costs then due. On completion Absolute Resources would
become the operator at the MJF and South Yelemes structures.

 

The Company has received a $1 million deposit from Absolute Resources in
respect of the exclusivity agreement.

 

AIM Rules and other Regulatory conditions

Under the AIM Rules for Companies the proposed disposal would require the
approval of Caspian Sunrise shareholders. Following the signing of a
conditional SPA the Company would therefore need to convene a general meeting
for shareholders to consider and, if thought fit, approve the proposed
disposal.

 

Completion would then also be dependent on the receipt of all appropriate
regulatory and tax consents in Kazakhstan, the UAE and the UK.

 

 

Comment

 

Clive Carver, Chairman said

 

"There is a price at which even the best performing asset is better sold.

 

With production expected from both Block 8 and West Shalva later this year, we
believe now is a good time to consider disposing of the maturing shallow
structures at the BNG Contract Area.

 

The Group's skills are the identification and acquisition of undervalued
assets and knowing when to let them go, rather than necessarily being
conventional operators of maturing fields.

 

While the MJF structure has plenty of oil still to be produced it has reached
a stage of maturity where maintaining production levels may well take an
increasing amount of time, effort and funding.

 

In summary, while we remain proud owners of the BNG shallow structures, we
recognise that the funds released from the sale of the MJF and South Yelemes
structures may be better used in other projects to increase shareholder
value."

 

Contacts:

 

Caspian Sunrise PLC

 

 Clive Carver, Chairman              +7 727 375 0202

 

 

WH Ireland, Nominated Adviser & Broker

 

 James Joyce         +44 (0) 207 220 1666

 James Bavister

 Andrew de Andrade

 

Qualified person

 

Mr. Assylbek Umbetov, a member of the Association of Petroleum Engineers, has
reviewed and approved the technical disclosures in this announcement.

 

This announcement has been posted to:

www.caspiansunrise.com/investors (http://www.caspiansunrise.com/investors)

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information
is disclosed in accordance with the Company's obligations under Article 17 of
the UK MAR. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

 

 

 

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