International Petroleum has expanded its oil and gas portfolio after acquiring an indirect 75 per cent interest in a Russian company which holds licence rights to explore four blocks in the largest oil producing region of Russia.
International Petroleum has expanded its oil and gas portfolio after acquiring an indirect 75 per cent interest in a Russian company which holds licence rights to explore four blocks in the largest oil producing region of Russia.
International Petroleum through its wholly owned subsidiary IPL Siberia acquired the interest in Irtysh-Neft for $5 million.
In a statement to the National Stock Exchange of Australia, the Tony Sage led company said a survey of the region in Western Siberia by an independent oil and gas consultant estimated unrisked prospective recoverable resource at approximately 260 mln bbls.
The consultant also estimated potential cash flow from the resource at $US1.24 billion.
Mr Sage said, "We are particularly excited by the acquisition of the 4 Krasnoleninskiy Blocks which provides an exploration opportunity in the largest oil producing area in Russia; in Western Siberia and will compliment the Company's Kazakhstan Project."
See company statement below:
The Company through its wholly owned subsidiary, IPL Siberia Limited (IPL Siberia), has acquired from Assuryan Assets Limited (Assuryan Assets) a 75% equity interest in Souville Investments Limited (Cyprus) (Souville). Souville is the 100% legal and beneficial holder of Irtysh-Neft - a Russian company having exploration rights to the Krasnoleninskiy Blocks. Assuryan Assets retains a 25% interest in Souville and by extension the Krasnoleninskiy Blocks.
The total licensed area of the Krasnoleninskiy Blocks (1,467 sq km) has been extensively explored by 2D seismic (1950 km completed). To assist the Directors in their due diligence to justify an investment in the Krasnoleninskiy Blocks, Ryder Scott, an independent oil and gas consultant was engaged and estimated unrisked prospective recoverable resources of the Krasnoleninskiy Blocks at 169 (Low Estimate), 260 (Best Estimate) and 385 (High Estimate) mln bbls. In addition, Ryder Scott has prepared a financial model dated July 1, 2010, and has estimated the potential cash flow from the unrisked prospective resources, using a 10% discount rate, at US$ 1.24 billion.
Pursuant to the Share Purchase and Funding Agreement (SPA) between Assuryan Assets and IPL Siberia, IPL Siberia, agreed to pay Assuryan Assets US$ 5 million and is obligated to drill 4 wells on the Krasnoleninskiy Blocks (being the Current Work Program) in consideration for the acquisition of the 75% interest in Souville.
International Petroleum has entered into a Finance Agreement pursuant to which it has agreed to make available to Souville a facility to finance the Current Work Program.
In accordance with the terms and conditions of the SPA, Assuryan Assets, Souville and IPL Siberia have entered into a Shareholders' Agreement for the purposes of regulating the ownership of Souville and management of the project.
Under the Shareholders' Agreement all operatorship issues are determined by a simple majority of votes (of which IPL Siberia holds 75% of the votes).
Past expenses, associated with exploration of the Krasnoleninskiy Blocks have been recorded in the books as loans extended by Assuryan Assets to Souville, totaling US$ 12.5 million and as loans extended by Souville to Irtysh-Neft totaling US$14.8 million (together, the Past Expense Loans). The Past Expense Loans are repayable only at such time as Irtysh-Neft and/or Souville Investments commence generating positive net cash flow.
Forward expenses, associated with drilling the IPL Siberia funded 4 wells within the Krasnoleninskiy Blocks will be financed by loans from IPL Siberia to Souville and on-loans from Souville to Irtysh-Neft. As with the Past Expense Loans, the forward expense loans will be repayable only at such time as Irtysh-Neft and/or Souville generate positive net cash flows.
Further exploration of the Krasnoleninskiy Blocks (following the drilling of the initial IPL Siberia funded 4 wells) will be financed by shareholders of Souville in the form of cash call loans in proportion to their shareholdings - 75% by IPL Siberia and 25% by Assuryan Assets.
Commenting on the acquisition, Tony Sage, International Petroleum's Chairman said 'We are particularly excited by the acquisition of the 4 Krasnoleninskiy Blocks which provides an exploration opportunity in the largest oil producing area of Russia; in Western Siberia and will compliment the Company's Kazakhstan Project.'
