Vermilion Energy Buys Share in Germany Gas Fields

Vermilion Energy Buys Share in GDF SUEZ Germany

Vermilion Energy announced that it has entered into a definitive purchase and sale agreement with GDF SUEZ E&P Deutschland, whereby Vermilion, through its wholly-owned subsidiary, will acquire GDF SUEZ’s 25% interest in four producing natural gas fields and a surrounding exploration license located in northwest Germany.

The Acquisition, which remains subject to customary conditions and receipt of all necessary GDF partner approvals, has an effective date of January 1, 2013 with closing targeted for December 31, 2013. Vermilion said its estimate of the company’s cash cost at closing of the Acquisition is approximately $170 million, subject to final closing adjustments and changes in foreign exchange rates. The Acquisition will be funded with existing credit facilities.

Asset Summary

The Acquisition entails the purchase of GDF SUEZ’s 25% contractual participation interest in a four-partner consortium formed in 1956 between ExxonMobil Corporation, Wintershall Holding GmbH, BEB Erdgas und Erdöl GmbH ( a joint venture between ExxonMobil and Deutsche Shell AG.), and GDF SUEZ. ExxonMobil is the operator of the assets held by the consortium. The purchase of GDF SUEZ’s non-working E&P Consortium Interest will enable Vermilion to participate in the exploration, development and production of the assets.

In addition to the E&P Consortium Interest, Vermilion will also receive a 0.4% equity interest in Ergas Munster GmbH, a joint venture created in 1959 to jointly transport, process, and market gas in northwest Germany. EGM partners include ExxonMobil, Wintershall, BEB, RWE Dea AG., and GDF SUEZ. The Transportation Interest will allow for our proportionate share of produced volumes to be processed, blended, and transported to designated gas consumers through the EGM network of approximately 2,000 kilometres of pipeline. Realized pricing for production from the assets is expected to be derived from the Netherlands based Title Transfer Facility Index price, less certain gas quality adjustments and marketing fees.

The assets subject to the E&P Consortium Interest include four gas producing fields which span eleven production licenses. The assets are expected to produce at an average rate of approximately 18 million cubic feet per day net in 2013 and have estimated proved plus probable reserves of 10.1 million boe net as of year-end 2013, as evaluated by GLJ Petroleum Consultants Ltd. The active wells produce from the Permian Zechstein Stassfurt carbonate and the Triassic Middle Bunter sandstone. The acquired assets have a relatively low effective decline rate estimated at approximately 16% annually and a reserve life index of approximately 9.2 years. In addition to the production licenses, the surrounding exploration license is also included in the E&P Consortium Interest. The exploration and production licenses comprise 204,000 gross acres, of which 85% is in the exploration license.

LNG World News Staff, November 06, 2013; Image: GDF SUEZ E&P Deutschland