Zenith has entered into a new conditional Deed of Variation which now includes the acquisition of a 100% interest in AAOG Congo and related intracompany loans for a revised total consideration of £200 000.
In the previous agreement, as announced on 24 March, the acquisition amount was set at £800 000 for 80% interest in the assets. However, the current climate, fuelled by economic uncertainty around low oil prices and the pandemic outbreak, opened up an opportunity for renegotiation.
Successful recent drilling undertaken during 2018 and 2019 has identified multiple potential productive reservoirs within the Tilapia oilfield across a number of formations including the regionally proven Mengo and Djeno reservoirs.
In addition, AAOG will novate 100% of the intercompany loans with AAOG Congo to Zenith as of the date of completion, equivalent to approximately £12.5 million. As previously announced, AAOG Congo is owed approximately US$5.3 million by Société Nationale des Pétroles du Congo (SNPC) as a result of past work performed on the licence.
Following completion, the company will assume responsibility of all ongoing costs and liabilities in relation to AAOG Congo. Zenith expects to implement a series of cost-cutting measures at AAOG Congo to improve profitability, especially in reaction to the significant recent decline in oil prices.
Andrea Cattaneo, CEO, commented: "Acquiring a 56% interest in the potentially transformational Tilapia oilfield, as well as 100% of the approximately US$5.3 million in receivables, for a consideration of £200 000 is a fantastic result made possible by the exceptional circumstances brought about by the Covid-19 pandemic, as well as the current low oil price environment.
We are fully confident that the necessary regulatory approval process in the Republic of the Congo for the transfer of ownership, as well as negotiations for a 25-year renewal of the Tilapia licence, will conclude positively, having been delayed due to the difficulties caused by Covid-19.
I believe we have obtained significant value for Zenith shareholders by concluding the transaction under the revised terms and I look forward to delivering further good news in due course.”
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/17042020/zenith-energy-acquires-tilapia-field/