PetroNeft completes farmout to Oil India

PetroNeft, an oil and gas exploration and production company operating in Russia, has completed the farmout of Licence 61 to Oil India Limited (OIL).

Following the granting of Russian Regulatory Approval on 30 June, the transaction with Oil India Limited was completed on 3 July. All debt due to Macquarie and Arawak has been repaid from the initial proceeds of US$ 35 million and the company is now debt-free.

Total investment

Under the terms of the Licence 61 Farmout, OIL has acquired a 50% interest in Licence 61 in return for a total investment of up to US$ 85 million consisting of:

• US$ 35 million upfront cash payment.
• US$ 45 million of committed exploration and development expenditure on Licence 61.
• US$ 5 million performance bonus, contingent upon average production from the Sibkrayevskoye Field reaching 7500 bopd within the next 5 years.

PetroNeft will remain operator of Licence 61, however OIL will have the right to second certain technical experts into PetroNeft’s Tomsk team.

Farmout benefits

• Significantly strengthens PetroNeft financially and strategically.
• Fully addresses PetroNeft’s capital structure and long term investment requirements with all existing debt repaid, cash for working capital and investment and significant funds available to invest directly in Licence 61.
• Introduces a strong industry partner seeking to build an oil and gas business and strategic position in Russia.
• Positions PetroNeft to fully exploit the potential of its assets and create value for all Shareholders.

Evercore acted as Financial Adviser to PetroNeft for the Licence 61 Farmout and White & Case were the principal Legal Advisers.

Comments

Dennis Francis, PetroNeft CEO, commented: “I’m delighted that we have now completed the Licence 61 Farmout fully clearing all of our debt and leaving us with surplus cash and access to significant further funds to invest in growing the Company.

“We look forward to working closely with our new partners Oil India and to realising the full potential of this asset and to developing further opportunities together.

“We have a planned multi-well drilling programme and will re-commence drilling at Licence 61 shortly. I look forward to updating shareholders with the results of this exciting programme over the coming months.”

Adapted from press release by Katie Woodward

Read the article online at: https://www.oilfieldtechnology.com/exploration/04072014/russian_company_petroneft_completes_farmout_to_oil_india_979/