REG - Wentworth Resources - Proposed Acquisition

Wentworth ResourcesAnnouncement

13/06/2022 07:00

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RNS Number : 5639O  Wentworth Resources PLC  13 June 2022

13 June 2022

 

 

 

WENTWORTH RESOURCES PLC

("Wentworth" or the "Company")

 

 

Proposed Acquisition of 25% Working Interest in Tanzanian Gas Development
Project

 

Creating Tanzania's Multi-Asset Gas Production Leader

 

Wentworth Resources (AIM: WEN), the independent, Tanzania-focused natural gas
production company, announces that it has reached agreement with Scirocco
Energy plc ("Scirocco") to acquire its 25% non-operated working interest in
the Ruvuma Production Sharing Agreement ("Ruvuma Asset"), in Tanzania (the
"Transaction").

 

The 1.9 Tscf (mean GIIP) Ntorya gas discovery located within Ruvuma, Tanzania
is operated by ARA Petroleum Tanzania (50% working interest, Aminex plc 25%)
and is adjacent to Wentworth's Mnazi Bay gas producing asset.

 

The consideration is comprised of an initial cash payment of $3 million due
upon Completion, with further deferred and contingent cash payments of up to
$13 million dependent on certain development and production milestones.

 

The consideration will be funded through Wentworth's cash resources whilst
allowing the Company to maintain its commitment to a long-term, sustainable
and progressive dividend for shareholders.

 

Katherine Roe, Chief Executive of Wentworth:

 

"This is a transformational transaction for Wentworth establishing us as a
dual-asset, full-cycle E&P with a significantly enhanced resource base and
production profile.  The deal represents an attractively priced, low risk
entry into a high growth opportunity which cements our position as a leading
supplier of domestic gas to Tanzania.

 

"This compelling growth opportunity is fully aligned with our commitment to
support the Government to reach its goal of providing universal energy access
by 2030 in accordance with our purpose to empower people with energy and
deliver value for Tanzania, Wentworth and all our stakeholders."

 

Strategic Rationale

 

·    Value accretive transaction represents an attractively priced, low
risk entry into a high growth opportunity with the majority of the
consideration only payable upon meeting development and production milestones

 

·    The Ruvuma development is expected to deliver a transformational
increase in Wentworth's production and resources alongside Mnazi Bay enabling
Wentworth to support both the growing energy needs and industrialisation of
Tanzania

 

·    Progresses Wentworth's stated strategy of increasing scale and
driving growth through a focus on natural gas projects in Tanzania

 

o  Positions Wentworth as the leading domestic gas player in Tanzania with a
diversified production, appraisal and development portfolio

 

o  Ruvuma will become the third producer of domestic gas in Tanzania
alongside Mnazi Bay (Wentworth 32% working interest) and Songo Songo

 

o  Enables Wentworth to continue to support the Government of Tanzania's
ambition to increase energy access through lower-carbon solutions and reach
universal energy access by 2030

 

·    Underscores Wentworth's position as a key partner for the Government
of Tanzania

 

·    Transforms Wentworth into a multi-asset domestic gas producer in
Tanzania and represents a first step into asset diversification and towards a
full-cycle portfolio

 

·    Wentworth's in-country expertise and track record of delivery will
support the Ruvuma JV to maximise the potential of a world class asset

 

·    Wentworth remains committed to offset all existing Scope 1 and 2
emissions and partially offset Scope 3 emissions in 2022 and will work with
the Ruvuma JV partners to ensure the development of the project is aligned
with these aspirations to enable the Company to continue to have one of the
lowest carbon intensities per boe in the UK plc market

 

The Ruvuma Asset

 

The Ruvuma asset contains the Ntorya-1 discovery well, drilled in 2012, and
the Ntorya-2 appraisal well, drilled in 2017, and is estimated by RPS (2018)
to have a mean estimated GIIP of c.1.9 Tscf.  The Ntorya-1 gas discovery well
is located approximately 30 km from the Madimba gas plant which is within the
Mnazi Bay concession.

 

Development activity is progressing with a 338 km(2) 3D seismic survey
currently underway before the drilling of the Chikumbi-1 appraisal well in
late 2022 or early 2023.  The Chikumbi-1 well aims to confirm 2C resources of
763 Bscf.  The cost of the seismic survey and appraisal well net to Wentworth
is estimated at $6.25 million.

 

Final Investment Decision ("FID") is targeted for 2023 with first gas expected
in late 2024 and an ultimate target production rate of up to 140 MMscf/d. The
project will require construction of a pipeline from the gas field to the
government operated Madimba gas facility, located approximately 30 km
eastward, which is capable of handling 210 MMscf/d and is currently receiving
most of the production volumes from the Mnazi Bay gas field. Gas from the
Madimba gas facility will then be distributed via existing gas infrastructure
to end users.

 

A commercialisation study performed by io oil and gas consultancy (a Joint
venture between Baker Hughes and McDermott) in 2017 showed that a 140 MMscf/d
Full Field development project would require approximately $143 million
(gross) of capital expenditures. Actual costs and project scope will be
dependent on a development plan agreed to by the Ruvuma JV partners and the
government.

 

 

Details of the Transaction

 

The economic date of the Transaction is 1 January 2022.

The consideration structure ensures that the majority is only paid in a
success case. The headline consideration of up to $16 million is payable in
cash. Initial consideration of $3.0 million is payable in cash payable upon
completion of the Proposed Transaction. Upon satisfaction of certain
conditions Wentworth will make a loan of $0.5 million available to Scirocco
(the "Initial Loan"). 50% of such Initial Loan is repayable in the event
completion does not take place.

Deferred and contingent payments represent the remaining cash payment of $13
million which is due upon the following key milestones:

o  $3.0 million on reaching FID;

 

o  Up to $8 million through a minority share of net profit to Wentworth; and

 

o  $2.0 million on reaching gross cumulative production of 50 Bscf.

 

Wentworth has agreed to a loan arrangement of up to $6.25 million with
Scirocco (the "Facility") to enable Scirocco to meet its cash call obligations
and provide continuity to the work programme in the interim period to
Completion. Any drawdowns under the Facility are subject to Scirocco
shareholders' approval and partner non pre-emption and the full amount of
drawdowns (less $0.25 million of the Initial Loan) are repayable in the event
of non-completion. The Facility will be secured by assignments of security by
Scirocco in favour of Wentworth over the Licence Documents for the Ruvuma
Asset. The grant of such security will be subject to the consent of the
Minister for Energy in Tanzania and both parties will look to obtain such
consent as soon as possible. The first $3.0 million to be drawn under the
Facility is interest free, however, any amounts drawn in excess of $3.0
million will incur interest at a rate of 7% per annum until such time as the
grant of the security in respect of the Facility is approved by the Minister
for Energy in Tanzania.

In line with the requirements of Schedule Four of the AIM Rules, Scirocco
recorded its interest in the Ruvuma Asset at a gross asset value of £14.63
million ($18.0 million) per its unaudited accounts for the six month period
ended 30 June 2021. For the audited year ended 31 December 2020, Scirocco
incurred losses relating to the Ruvuma Asset of £0.81 million.

Timetable and Conditions

 

The proposed Acquisition is subject to formal shareholder approval from
Scirocco's shareholders at a General Meeting to be held in due course, as well
as certain regulatory approvals plus the non-exercise or waiving of
pre-emption rights by the other Ruvuma Asset JOA partners.

 

The Transaction will not result in any changes to the Board of Wentworth.
The Company currently expects the Transaction to complete ahead of the
Longstop Date of 30 June 2023.

Conference Calls

Analyst call

The Company is holding a conference call for analysts at 9.30am BST today,
Monday 13 June 2022.

To register for the call, please click on the following link:

https://secure.emincote.com/client/wentworth/wentworth009/vip_connect
(https://secure.emincote.com/client/wentworth/wentworth009/vip_connect)

You can view the presentation during the call via the following link:

https://secure.emincote.com/client/wentworth/wentworth009
(https://secure.emincote.com/client/wentworth/wentworth009)

Investor call

The Company is holding a live presentation and Q&A webinar for investors
at 12.00pm BST today, Monday 13 June 2022, via Investor Meet Company.

To register for the call, please click on the following link:

https://www.investormeetcompany.com/wentworth-resources-plc/register-investor
(https://www.investormeetcompany.com/wentworth-resources-plc/register-investor)

 

 

Ends

 

 Enquiries:

 Wentworth Resources               Katherine Roe,                                                              katherine.roe@wentplc.com

Chief Executive Officer
+44 (0) 7841 087 230

  Stifel Nicolaus Europe Limited    AIM Nominated Adviser and Joint Broker                                      +44 (0) 20 7710 7600

Callum Stewart

Ashton Clanfield

Simon Mensley

  Peel Hunt LLP                    Joint Broker                                                                 +44 (0) 20 7418 8900

Richard Crichton

Alexander Allen

  FTI Consulting                   Communications Advisor                                                       +44 (0) 20 3727 1000

Sara Powell

                                   Ben Brewerton

                                   Ollie Mills

 

About Wentworth Resources

Wentworth Resources plc (AIM: WEN) is a leading, domestic natural gas producer
in Tanzania with a core producing asset at Mnazi Bay in the onshore Rovuma
Basin in Southern Tanzania.

 

 

Inside Information

The information contained within this announcement is deemed by Wentworth to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) no. 596/2014 ("MAR"). On the publication of this announcement via
a Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.

 

NOTES

 

Resources and Gas Initially in Place (GIIP) volumes quoted in this release
have been estimated by RPS Energy, an independent third-party evaluator and
were contained as part of an EGM circular for Aminex plc in December 2018. The
document is available on Aminex plc's website.

 

RPS Energy is an independent energy advisory consultancy, part of the
London-listed RPS Group plc.

Volumes presented in the report were estimated using the 2018 Petroleum
Resources Management System ('PRMS') sponsored by the
SPE/WPC/SEG/AAPG/EAGE/SPEE/SPWLA as the standard for classification and
reporting.

Information related to the referenced io oil & gas consultancy
commercialisation report can be found in a corporate presentation dated 17
July 2018 on Aminex plc's website.

In accordance with the AIM Rules for Companies, the technical information
contained in this announcement has been reviewed and approved by Mr. Aaron
LeBlanc, Chief Operating Officer of Wentworth Resources PLC. Mr. LeBlanc is a
qualified person as defined in the London Stock Exchange's Guidance Note for
Mining and Oil and Gas Companies and has the necessary professional and
technical competencies to conduct and review petroleum operations. Mr. LeBlanc
has a Bachelor of Science Degree in Geology from the University of Calgary and
has been a professional member of APEGA and a member of the AAPG and EAGE. Mr.
LeBlanc has 20 years of oil and gas industry technical, operational and
leadership experience.

 

RPS definitions:

Contingent Resources: are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from known accumulations, by the
application of development project(s) not currently considered to be
commercial owing to one or more contingencies. Contingent Resources have an
associated chance of development. Contingent Resources may include, for
example, projects for which there are currently no viable markets, or where
commercial recovery is dependent on technology under development, or where
evaluation of the accumulation is insufficient to clearly assess
commerciality. Contingent Resources are further categorized in accordance with
the range of uncertainty associated with the estimates and should be
subclassified based on project maturity and/or economic status.

Prospective Resources: are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from undiscovered accumulations by
application of future development projects. Prospective Resources have both an
associated chance of geologic discovery and a chance of development.
Prospective Resources are further categorised in accordance with the range of
uncertainty associated with recoverable estimates, assuming discovery and
development, and may be sub-classified based on project maturity.

1C: Denotes low estimate of Contingent Resources

2C: Denotes best estimate of Contingent Resources

3C: Denotes high estimate of Contingent Resources

1U: Denotes the unrisked low estimate qualifying as Prospective Resources

2U: Denotes the unrisked best estimate qualifying as Prospective Resources

3U: Denotes the unrisked high estimate of qualifying Prospective Resources

 

 

RPS Resource and gas in place in place table

                                                RUVUMA: GAS IN PLACE AND RESOURCES 100% LICENCE BASIS (Bcsf)
 Category                                       Ntorya discovery estimated GIIP         Resources               Prospective Resources
                                                P90       P50       P10       Mean      1C      2C      3C      1U      2U      3U
 Gas Initially in Place                         669       1,642     3,363     1,870
 Prospective Resource                                                                                           399     936     1,798
 Contingent Resources: Development Pending                                              26      81      213
 Contingent Resources: Development Unclarified                                          342     682     945
 TOTAL NET                                      669       1,642     3,363     1,870     368     763     1,158   399     936     1,798

 

·    Estimations of resources assumes development licence is ratified

 

·    Prospective resources shown relate to the Jurassic Chikumbi Prospect
which lies below and separate from the Ntorya development

 

Glossary of Terms and Abbreviations

 

Bscf: billions of standard cubic feet

Boe: Barrels of oil equivalent

GIIP: Gas Initially in Place

GSA: Gas Sales Agreement

MMscf/d: millions of standard cubic feet per day

Tscf: trillion standard cubic feet

 

 

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