Irish oil and gas explorer PetroNeft Resources is to acquire an additional 40 per cent interest in a Russian gas well for $2.9 million (€2.4 million).
The company, which operates in the Tomsk Oblast, Russia, said on Friday the heads of terms had been signed with Belgrave Naftogas, formerly Arawak Energy Russia, in relation to licence 67. The deal increases PetroNeft’s interest from 50 per cent to 90 per cent.
The payment will be made through the issuance of 80 million PetroNeft ordinary shares to Belgrave Naftogas (representing an 8.7 per cent shareholding) for a value of $1.2 million.
There will also be a cash consideration of $1.7 million which will be financed through a three-year loan from Belgrave Naftogas to PetroNeft with an interest rate of 8 per cent above the Bank of England base rate.
Belgrave Naftogas will also have the right to nominate a director on to the PetroNeft board.
Boosting production
Chief executive of PetroNeft Resources, David Sturt, said the deal was "consistent with the board and management's previously-announced commitment of enhancing shareholder value through boosting production, reserves and revenue".
“As early as next month the asset is expected to transform from being an exploration to a producing asset,” he said. “This agreement will add significant impetus to our plans to develop the licence.
“The significant premium on the share converts reflects both PetroNeft Resources and Belgrave Naftogas’s shared view of the mismatch between the current share price of PetroNeft and the intrinsic value of PetroNeft’s underlying asset portfolio.
“We expect that Belgrave Naftogas’s nominated director will combine international experience and regional insight to boost the financial and operating profile of our assets.
“We will be working hard with Belgrave Naftogas to ensure that we close the acquisition during the first quarter this year.”
