TIDMPXEN
RNS Number : 9827B
Prospex Energy PLC
14 October 2020
Prospex Energy PLC/ Index: AIM / Epic: PXEN / Sector: Oil and
Gas
Prospex Energy PLC ('Prospex' or the 'Company')
Divestment of PXOG Massey
Prospex Energy PLC, the AIM quoted investment company focused on
European gas and power projects, is pleased to announce it has
signed a sale and purchase agreement ('SPA') with H2Oil Limited
('H2Oil') regarding the sale of the entire issued share capital of
the Company's wholly owned subsidiary, PXOG Massey Limited
('Massey'). Massey's sole asset is its 50% interest in the economic
rights of the EIV-1 Suceava Concession, onshore Romania
('Suceava'). Under the terms of the SPA, the Company will receive
up to GBP215,000 in cash in respect of historical debt owed to the
Company by Massey and nominal consideration for shares in Massey of
which 85% of the funds (GBP182,650) has already been received by
Prospex.
The sale of Massey follows a strategic review by the Board of
Prospex's portfolio of late stage European onshore gas projects,
which was instigated at the time of the Company's acquisition of a
49.9% interest in the El Romeral gas and power project in Spain
earlier this year. Following the sale of Massey, Prospex will
concentrate on advancing its three core projects:
-- The Podere Gallina Exploration Permit, onshore Italy where
first production at the Selva gas field at an initial rate of up to
150,000 scm/day remains on course for H1 2021
-- The El Romeral integrated gas and power project, onshore
Spain where the Company is focused on increasing power generation
at the existing 8.1 MW plant towards its 100% capacity via the
drilling of low cost, low risk wells - operating at 100% capacity
and selling electricity at Spain's historic average price of EUR70
per MWh (including subsidy) has the potential to generate annual
revenues and profit before tax of EUR4.2 million and EUR2.4
million, respectively
-- The Tesorillo Gas Project, onshore Spain where up to 830 Bcf
of gas (Best Estimate) of gross un-risked prospective resources
have been identified
Edward Dawson, Managing Director of Prospex, said, "The sale of
our 50% interest in Suceava follows a long-term strategic review of
our extensive portfolio. With the acquisition of El Romeral at the
start of the year and with it the proposed addition of another 11
high quality, very low risk prospects it became clear that Suceava
would be less core as time progressed. As well as providing useful
capital, the sale will therefore bring more focus to the remaining
core projects in our portfolio, all of which have the potential to
hold company-making volumetrics and, importantly, multiple targets
that could unlock the substantial resources we have identified.
"At Podere Gallina, in addition to 13.3 Bcf gross gas reserves
at the soon to be producing Selva field, there are a further 14.1
Bcf of gross contingent resources at the two historical gas
producing North Flank and South Flank reservoirs, as well as four
large prospects, which are estimated to hold aggregate gross
prospective resources (best estimate) of 91.5 Bcf. At El Romeral,
two development locations and 11 prospects, which have been
assigned gross contingent resources of 5 Bcf and gross prospective
gas resources of 90 Bcf respectively, provide significant scope to
increase gas production and in the process increase the operational
capacity of the 8.1 MW power station up to 100% from the current
22% level. Finally, at the Tesorillo Gas Project in Spain, up to
830 Bcf of gas (Best Estimate) of gross un-risked prospective
resources have been identified and are in the process of being
de-risked.
"With the Selva gas field in Italy on course to commence
production in H1 2021 and the El Romeral acquisition advancing
towards final government sign-off, which is expected to trigger a
step-up in preparations for a low cost drilling campaign, we have a
roadmap in place to progress our considerable resource base up the
development curve, and in the process generate significant value
for shareholders. I look forward to providing further updates on
our progress. In the meantime, we wish H2Oil well with the asset as
it makes its first steps in the Romanian E&P market. We also
wish to place on record our thanks to the operator, Raffles Energy,
who we have very much enjoyed working with."
Further Information
In August 2017, the Company acquired a 50% economic interest in
the Exploration Area of the EIV-1 Suceava Concession in North East
Romania, through Massey its 100% owned subsidiary. Suceava holds
the Bainet field, which was discovered in late 2017. As reported in
the Company's recent half year statement to 30 June 2020, average
daily production levels in H1 2020 were 15,000m(3) per day,
1,000m(3) above 2019's daily production levels. In 2019, the
Company participated in the non-commercial Bainet-2 exploration
well. Primarily due to write downs associated with Bainet 2, a loss
of GBP788,799 was reported for Massey for the year ended 31
December 2019. As at 31 December 2019, the carrying value of the
investment in Massey on Prospex's balance sheet had been written
down to zero.
The Economic Date of the sale is 1 September 2020. Under the
terms of the SPA, Prospex has already received 85% of the funds
(GBP182,650) in settlement of historical debt owed by Massey to the
Company. Of the remaining GBP32,350, approximately half will be
released subject to a production milestone at Bainet. Monthly
production at Bainet is currently lower than usual due to a recent
failure of a third party compressor outside the concession. Repairs
are ongoing but hindered by the COVID-19 pandemic. These residual
funds will be released to the Company once normal operations have
resumed. Similarly, the other half is to be retained against
general warranties given by the Company and will be released should
no claims arise in the 6 months once normal operations have
resumed.
The completion of the sale of Massey is subject to a number of
typical conditions including Romanian government regulatory
sign-offs and approval of the change of control of Massey. The
Company and H2Oil hope to complete the transaction at the earliest
opportunity. In the meantime, Edward Dawson has resigned as
director of Massey and Brendan Daley has assumed the position as
director as H2Oil's representative. Pending completion there are a
number of customary interim obligations and there are provisions
for a reversion of the transaction in certain circumstances. The
Company and H2Oil are confident of completion in due course.
About H2Oil
H2Oil Limited - part of the H2Oil group of companies - provides
upstream oil and gas services including well testing, well site
supervision, full scope equipment supply and packaged services. The
transaction with Prospex Energy plc is the group's initial entry
into the upstream production sector. www.h2oil.co.uk
* * ENDS * *
For further information visit www.prospexoilandgas.com or
contact the following:
Edward Dawson Prospex Energy PLC Tel: +44 (0) 20 3948
1619
Rory Murphy Strand Hanson Limited Tel: +44 (0) 20 7409
Ritchie Balmer 3494
Jack Botros
Colin Rowbury Novum Securities Limited Tel: +44 (0) 20 7399
Jon Belliss 9427
Duncan Vasey Peterhouse Corporate Finance Tel: +44 (0) 20 7469
0932
Frank Buhagiar St Brides Partners Ltd Tel: +44 (0) 20 7236
Cosima Akerman 1177
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
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END
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