USA: Entek Sells Gulf of Mexico Assets

USA: Entek Sells Gulf of Mexico Assets

Entek Energy says that in line with the Company’s strategy, the Gulf of Mexico portfolio continues to be rationalized in order to maintain exposure to the offshore conventional resource potential whilst preserving the Company’s capital base.

This will allow the required funds to be deployed in its onshore work program in the Niobrara oil resource play where the potential exists for significantly greater value creation.

Accordingly the Company  has completed the sale of its 50% working interest in the VR341/VR342 blocks in the Gulf of Mexico with the consideration being US$7.5 million in cash as well as a significant retained overriding royalty interest. The sale of Entek’s working interest in VR341/342 was made following an extensive review of the risk/reward profile of this asset in the context of the Company’s overall development and exploration portfolio and  balance sheet limitations. Entek’s ongoing participation with a working interest in the development of this asset would have required significant additional capital in the form of both debt and equity which could not be supported in view of current global capital market conditions.

This sale means that Entek receives an immediate cash injection and a future royalty stream from a successful development of the project, without further risk or capital exposure thereto. The cash component of the consideration represents a  200% return on the capital Entek has expended on the project to date and the future cash generation from the royalty component has the potential to be significant. The Company currently has working interests in eight blocks in the Gulf of Mexico in addition to the overriding royalty interest in blocks VR 341 and VR 342.

Two of these blocks (GA A133 and PN 975) are on production with recently audited net revenue of around US$300,000 per month, while the oil prospective blocks, GA 212 and GA 213, have now been independently confirmed as having a  resource potential of up to 8 million barrels of oil. The Company is currently embarking on a farmout process of these blocks, seeking to achieve a free carried interest during the exploration and development phase to first oil production.

Offshore Energy Today Staff, March 6, 2012; Image: Entek