REG - Predator O&G Hldgs - Conditional Acquisition and Challenger settlement

Predator Oil & Gas HoldingsAnnouncement

20/12/2022 07:00

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RNS Number : 2278K  Predator Oil & Gas Holdings PLC  20 December 2022

FOR IMMEDIATE RELEASE

20 December 2022

 

               Predator Oil & Gas Holdings Plc / Index: LSE
/ Epic: PRD / Sector: Oil & Gas

 
LEI 213800L7QXFURBFLDS54

Predator Oil & Gas Holdings Plc

("Predator" or the "Company" and together with its subsidiaries the "Group")

 

Conditional acquisition of Cory Moruga; CO(2) EOR collaboration and settlement
with Challenger Energy Group Plc

 

      Highlights

 

·    Settlement reached with Challenger Energy Group PLC

 

·    Progressing acquisition of Cory Moruga oil field in Trinidad

 

·    US$9 million Gross Consideration

 

·    Net payment of US$3 million cash, in staged payments with US$6
million of potential liabilities and other value items offset against Gross
Consideration

 

·    Cory Moruga under-developed and very well suited to application of
CO2 EOR

 

Predator Oil & Gas Holdings Plc (LSE: PRD), the Jersey based Oil and Gas
Company with near-term gas operations focussed on Morocco, is pleased to
announce that it has today entered into a binding Term Sheet (the "Term
Sheet") with Challenger Energy Group PLC ("Challenger Energy"), providing for:

 

(i)         the acquisition of Challenger Energy's 83.8% interest in
the Cory Moruga asset; and

 

(ii)        a mutually agreed final settlement in relation to the Well
Participation Agreement under which a CO2 enhanced oil recovery project ("CO2
EOR") was carried out by Predator Oil & Gas Trinidad in CEG Inniss-Trinity
Trinidad Limited's (formerly FRAM Exploration Trinidad Limited) Inniss-Trinity
field in Trinidad -

 

together the "Transaction".

 

Key terms of the Transaction

 

·    Predator will acquire 100% of the issued shares of T-Rex Resources
(Trinidad) Limited ("T-Rex"), an indirectly wholly owned subsidiary of
Challenger Energy that holds its 83.8% interest in, and is the operator of,
the Cory Moruga licence.

 

·    Gross consideration is US$9.0 million.

 

o  US$3.0 million is payable to Challenger Energy by Predator in cash, in
instalments as follows:

 

(i)         US$1 million upon completion;

 

(ii)        a further US$1 million 6 months after completion; and

 

(iii)       a further US$1 million payable once Cory Moruga field
production first reaches 100 barrels of oil per day.

 

o  An agreed amount of US$6 million will be offset against the Gross
Consideration to reflect the aggregate agreed value of:;

 

(i)         T-Rex's liabilities (including all contingent and
potential liabilities, whether crystallised or not); and

 

(ii)        The option value embedded in Challenger Energy's back-in
right ("Back-in Right");

 

(iii)       the repayment of all loans and debts owed or claimed to be
owed by either party to the other in respect of the Inniss-Trinity CO(2) EOR
pilot project (recognising that absent a settlement between the parties, such
amounts would be recoverable only from incremental production from the
Inniss-Trinity CO(2) EOR pilot project area), and

 

(iv)       the mutual final settlement agreed between the parties in
respect of all disputes and claims in relation to the Inniss-Trinity CO(2) EOR
pilot project.

 

Engagement Letter with Optiva Securities Limited ("Optiva")

An Engagement Letter with Optiva has been executed by the Company regarding
any potential M & A transaction with, or an investment by parties directly
into, Predator Oil & Gas Trinidad Limited ("POGT"), a wholly owned
subsidiary of the company, to gain specific exposure to CO2 EOR activities.
Any such external investment specifically into POGT would allow this project
to progress simultaneously with Predator's other projects, while not diluting
the value of those other projects.

 

Back-in Right for 25% Equity of Predator's share of Cory Moruga

 

In relation to the  Back-in Right, it may be exercised at Challenger Energy's
election:

o  at any time in the period commencing three years after the completion date
or first commercial production from Cory Moruga field (whichever is earlier)
and ending six years after the completion date;

 

o  If the Back-in Right is exercised, Challenger Energy will pay to Predator
a fixed cash amount of US$2.25 million:

 

(i)   plus a variable percentage of the costs incurred by Predator on the
Cory Moruga field subsequent to the completion date;

 

(ii)  the percentage dependent on the P50 Resource attributable to the Cory
Moruga field at that time being:

 

a)   50% of costs incurred if the P50 Resource is less than 5 million
barrels of oil (MMbbls);

 

b)   75% of costs incurred if the P50 Resource is more than 5   MMbbls but
less than 10 MMbbls; and

 

c)   100% of costs incurred if the P50 resource exceeds 10 MMbbls.

 

Framework for CO2 EOR collaboration

·    Predator and Challenger Energy have agreed to establish a
collaboration in relation to CO(2) EOR activities and projects in other areas
in Trinidad, including but not limited to potential application of CO(2) EOR
techniques across Challenger Energy's other fields;

 

·    Leveraging Predator's expertise in CO(2) EOR techniques and
methodologies.

 

Completion

·    Predator has until 31 January 2023 to complete confirmatory due
diligence, prior to which time the parties will also work in good faith to
enter into long-form transaction documentation in respect of the Transaction.

 

·    Thereafter, completion of the Transaction will be conditional on
consent to the Transaction being received from the Trinidadian Ministry of
Energy and Energy Industries ("MEEI"), including agreement from MEEI to a
revised work programme proposed by Predator:

 

(i)   work programme to include technical work, CO(2) EOR activity, and new
well drilling in 2024;

 

(ii)  a waiver by MEEI of past dues and claims in respect of Cory Moruga
field, and a revision by MEEI of the basis of future licence fees applicable
to the Cory Moruga licence.

 

The parties have agreed to work together to secure the required consents and
approvals and achieve completion of the Transaction as soon as reasonably
practicable on or before 30 May 2023, with a long stop date of 31 August 2023
after which either party may elect to terminate the agreement or they can
mutually agree to an extension.

Independent Competent Persons Report ("CPR")

The Company will commission a CPR on Cory Moruga in the coming weeks which is
expected to be published before Completion.

 

Background

The Cory Moruga field in Trinidad was first identified by Predator as a prime
candidate for CO2 EOR in 2017. An option to acquire Cory Moruga was outlined
in the Company's Prospectus published in 2018 at the time of admission to the
Main Market but was later dropped when the Company elected to focus on the
Guercif Licence in Morocco.

The Inniss-Trinity pilot CO2 EOR Project allowed the Company to develop
valuable CO2 EOR operational expertise and for it to establish exclusivity in
respect of using the surplus liquid CO2 supply in Trinidad for CO2 EOR
operations with Massy Gas Products Limited ("Massy").

The Cory Moruga field is under-developed as a result of which higher reservoir
pressures have been maintained. This makes it relatively unique in Trinidad as
it creates the possibility to execute a miscible CO2 EOR project to generate
the potential to significantly increase the oil recovery factor.

Cory Moruga is covered by 3D seismic which shows less fault
compartmentalisation relative to many other mature fields onshore Trinidad. It
has never been water-flooded. This assists the development of a CO2 injection
strategy to potentially maximise the effectiveness of the CO2 sweep through
the reservoirs.

A small part of the Moruga West field extends into Cory Moruga. The ex-BP
field continues to produce from the same Herrera reservoirs as have been
encountered in Cory Moruga drilling to date. In 2017 the Company
unsuccessfully bid for the Moruga West field, which was then owned by Massy.
The geological understanding of the development and extent of the Herrera
reservoirs in Moruga West has been invaluable in the Company's assessment of
the growth potential of the Cory Moruga asset.

Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings
Plc commented:

"We are delighted to have negotiated an amicable settlement with Challenger
Energy - which gives a positive footing for both companies to move forward -
and gives Predator access to the under-developed Cory Moruga field. Cory
Moruga has always been recognised by the Company as a candidate for miscible
CO2 EOR. Since 2017, when the Company first had an option to acquire it, WTI
spot oil price has increased by 46% to improve CO2 EOR project economics.

It is important for our shareholders that the Company is seen to be leveraging
its expertise in CO(2) EOR techniques and methodologies developed as a
consequence of executing the Inniss-Trinity CO2 EOR Project. This allows us to
capture value for the Inniss-Trinity CO2 EOR Project that would otherwise have
been unrealised. Cory Moruga creates another exciting growth opportunity for
2023 which the Company can operate entirely itself and can exercise direct
control over the receipt of potential future production revenues."

For further information visit www.predatoroilandgas.com
(http://www.predatoroilandgas.com)

 

Follow the Company on twitter @PredatorOilGas.

 

This announcement contains inside information for the purposes of Article 7 of
the Regulation (EU) No 596/2014 on market abuse

 

For more information please visit the Company's website
at www.predatoroilandgas.com (http://www.predatoroilandgas.com/) :

 

 

 

 

Enquiries:

 Predator Oil & Gas Holdings Plc                                 Tel: +44 (0) 1534 834 600

 Paul Griffiths               Executive Chairman                 Info@predatoroilandgas.com (mailto:Info@predatoroilandgas.com)

 Lonny Baumgardner   Managing Director

 Novum Securities Limited                                        Tel: +44 (0) 207 399 9425

 David Coffman / Jon Belliss

 Optiva Securities Limited                                       Tel: +44 (0) 203 137 1902

 Christian Dennis, CEO

 Ben Maitland, Corporate Finance                                 Tel. +44 (0) 203 034 2707

 Flagstaff Strategic and Investor Communications                 Tel: +44 (0) 207 129 1474

 Tim Thompson                                                    predator@flagstaffcomms.com (mailto:predator@flagstaffcomms.com)

 Mark Edwards

 Fergus Mellon

 

Notes to Editors:

About Cory Moruga field

·    The Cory Moruga licence is a direct licence from the Trinidadian
Ministry of Energy and Energy Industries ("MEEI") in which Challenger Energy's
wholly owned subsidiary T-Rex Resources (Trinidad) Limited ("T-Rex"), holds an
83.8 % interest, alongside its partner Touchstone Exploration Inc. which has
16.2% interest. T-Rex is operator.

 

·    The Cory Moruga licence includes the Snowcap oil discovery, with oil
previously having been produced on test from the Snowcap-1 and Snowcap-2ST
wells. On the basis of the production tests, a development plan was submitted
in 2018, prior to Challenger Energy taking control of the asset, however, the
block was not further developed. Subsequent to the acquisition of Columbus
Energy Resources PLC in 2020, Challenger Energy undertook a detailed technical
review of its Trinidad portfolio and assessed that Cory Moruga field required
further appraisal before a commercial development decision could be made.

 

·    Challenger Energy considers the Cory Moruga licence to be non-core to
its cash flow generative production-focused business in Trinidad, and
therefore no further work has been planned for the Cory Moruga field in the
near-term. At the same time, Predator considers that the Cory Moruga field
represents an ideal candidate for a CO(2) EOR project.

 

Predator is operator of the Guercif Petroleum Agreement onshore Morocco which
is prospective for Tertiary gas in prospects less than 10 kilometres from the
Maghreb gas pipeline.  The MOU-1 well has been completed and a follow-up
testing programme is being finalised to coordinate with a further drilling
programme beginning in 2022.

 

Predator is seeking to further develop the remaining oil reserves of
Trinidad's mature onshore oil fields through the application of CO2 EOR
techniques and by sequestrating anthropogenic carbon dioxide to produce
"greener" oil.

 

In addition, Predator also owns and operates exploration and appraisal assets
in licensing options offshore Ireland, for which successor authorisations have
been applied for, adjoining Vermilion's Corrib gas field in the Slyne Basin on
the Atlantic Margin and east of the decommissioned Kinsale gas field in the
Celtic Sea.

 

Predator has developed a Floating Storage and Regasification Project ("FSRUP")
for the import of LNG and its regassification for Ireland and is also
developing gas storage concepts to address security of gas supply and
volatility in gas prices during times of peak gas demand.

 

The Company has a highly experienced management team with a proven track
record in operations in the oil and gas industry.

 

 

 

 

 

 

 

 

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