Panoro exits Nigeria with Aje stake sale as PetroNor takes over lead role
E&P company Panoro Energy is exiting Nigeria following an agreement to sell all of its interest in OML 113, offshore Nigeria, to PetroNor. On the other hand, PetroNor will take over a lead technical and management role for the project to progress it to the next phases.
Panoro said on Tuesday it had entered into a sale and purchase agreement with PetroNor E&P Limited (PetroNor) to divest all outstanding shares in its fully owned subsidiaries Pan-Petroleum Services Holding BV and Pan-Petroleum Nigeria Holding BV for an upfront consideration consisting of the allotment and issue of new PetroNor shares with a fixed value of $10 million plus a contingent consideration of up to $25 million based on future gas production volumes.
The divested subsidiaries hold 100% of the shares in Pan-Petroleum Aje Limited (Pan Aje), which participates in the exploration for and production of hydrocarbons in Nigeria and holds a 6.502% participating interest, with 16.255% cost bearing interest, representing an economic interest of 12.1913% in Offshore Mining Lease no. 113 (OML 113).
Following completion of the transaction, Panoro will have no presence in Nigeria.
John Hamilton, Chief Executive Officer of Panoro said: “Aje was a non-core asset for Panoro and allows us to further focus on expanding our organic operations in Tunisia and Gabon while retaining exposure to the considerable upside at OML 113 through the deferred consideration. We are very confident that PetroNor has the technical and financial capabilities along with the depth of expertise and vision to advance further the next ambitious development phases of Aje in a smooth and efficient aligned partnership with the operator, YFP.”
Under the terms of the transaction, PetroNor has an option to pay a portion of the share consideration in cash, in an event PetroNor’s share price reduces to less than $0.13 per share (based on the current number of shares in issue), at the time of completion of the transaction.
By its indirect acquisition of Pan Aje, PetroNor will with effect as of June 30, 2019, assume all the benefits and obligations in relation to Panoro’s interest in the OML 113 operations.
PetroNor taking over technical & management role
Concurrently, PetroNor is in the process of finalizing separate agreements with the OML 113 operator Yinka Folawiyo Petroleum (YFP) to create a new holding company. PetroNor will assume a lead technical and management role in order to progress the next phases of the project. Together these agreements provide the framework and pathway towards sanction of the next phases of the Aje project in order to exploit the substantial gas and liquids reserves and unlock its significant value.
PetroNor and YFP will hold respectively 45% and 55% of the SPV. The SPV, which will include the current license ownerships of YFP (the Operator), YPF-DW and Panoro, will hold an approximate 75.5% participating interest, approximately 29% economic interest for the initial period and approximately 38.7% economical interest for the main part of the project going forward.
Completion of the transaction is conditional upon the execution and completion of the agreements between PetroNor and YFP, the authorisation of the Nigerian Department of Petroleum Resources and the consent of the Nigerian Minister of Petroleum Resources. Securing the authorisation and consent is expected to take several months with a long stop date agreed by the parties of December 31, 2020, following which either party is entitled to terminate the transaction.
Following completion of the transaction, subject to the terms agreed with PetroNor on a best efforts basis, Panoro’s intention is to declare a special dividend and distribute the share consideration, to the extent received in shares, to its shareholders.
Once Pan Aje has recovered all costs related to the accumulated investments incurred after the date of completion, PetroNor must pay to Panoro additional consideration of $0.15 per 1,000 cubic feet of the Aje Natural Gas Sales Volume, such additional consideration being capped at $25 million.
Julien Balkany, Chairman of Panoro, commented: “Panoro has been reviewing options in relation to its Nigerian assets with the objective of potentially unlocking value of OML 113 for its shareholders. This divestment is consistent with Panoro’s strategy to optimize its E&P portfolio. In addition, through the contemplated distribution of PetroNor shares to Panoro shareholders, this transaction provides Panoro’s shareholders with the opportunity to directly retain exposure to OML 113.”
Jens Pace, Chief Executive Officer of PetroNor, said: “This acquisition is wholly in line with our stated growth strategy in terms of acquiring assets that add production and material reserves and resources to the company. The upside potential attached to this project is significant and we are confident that the restructuring of the Aje partners, through the partnership with YFP, will result in a dynamic and effective operating JV capable of realising the full value of the field, both in terms of near-term oil production growth and more importantly with regards to the development of the substantial gas resources associated with the field.”
The Aje field was discovered in 1997 in water depths ranging from 100-1,500m. The field came on production in May 2016 with oil processed and exported from a leased FPSO, the Front Puffin.
It has produced a cumulative of 3.6 million barrels of oil and condensate as at August 1, 2019. The current production rate is in the order of 3,000 bopd of oil (including some condensate). PetroNor has been working with the indigenous company, YFP, to prepare a re-vitalisation plan for the field.
The development program is phased to minimize exposure and secure a solid rate of return on the investment. The field is expected to reach a gross production of 20,000 boepd of which 5,000-7,000 bopd consist of oil and condensate.
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