Transcorp Partners SacOil SA, Receives $30M For Oil Block
The Transnational Corporation of Nigeria Plc (Transcorp) today signified that its rebirth is gaining momentum when it entered into a joint venture agreement today with SacOil Holdings Limited of South Africa (SacOil) to develop its oilfield in collaboration with Energy Equity Resources Limited (EER).
This landmark agreement is supported by the position of observers who reckon that in less than a decade Africa will produce at least 20% of global oil - compared with less than 10% today - as oil resources in America and the North Sea become exhausted.
According to a latest study, ‘In 2011 the continent will already produce more oil than North America, and by 2020 it will be the world's third-biggest oil region’.
Over the past year it has become clear that Nigeria and Angola, which traditionally have been the two largest oil producers in Africa south of the Sahara, need to step up to meet new opportunities emerging on the continent – with the Jubilee oilfield in Ghana expected to produce its first oil, 12000 bpd by April 2011.
The Transcorp move, placed against this background, is sending a signal to the investors and indeed the market of its determination to realise its potential credible partnerships interested in the PSC for OPL 281 by advancing the cause for its commercial viability.
Background to OPL 281
The OPL 281 PSC is located onshore in the western delta region of Nigeria and adjacent to the widely publicised Shell divestment block OML 42.
OPL 281 was awarded to Transcorp during the FGN mini bid round in 2006. Transcorp paid all but US$8.75 million of US$30 million signature bonus. The outstanding signature bonus has now been paid by SacOil, on behalf of the Joint Venture and Transcorp.
Previous operator, Royal Dutch Shell had discovery wells Obote-1 drilled in 1970 and Ekoro-1 drilled in 1967 on OPL 281. 3D Seismic obtained by Shell 1991/92 covers the entire block.
The SacOil Interest
The joint venture shall acquire 40 per cent of Transcorp’s 100 per cent Participating Interest in the PSC for OPL 281 and SacOil’s direct interest in OPL281 would be 20 per cent.
SacOil’s Nigerian partner, EER 281 Nigeria Limited, a wholly owned Nigerian subsidiary of EER, has also executed the same farm-in agreement to acquire an additional 20 per cent Participating Interest in OPL 281 and under the OPL 281 PSC, with Transcorp retaining the remaining 60 per cent. SacOil’s interest shall be held directly through a wholly owned Nigerian subsidiary.
Rationale for the Acquisition
The Joint Venture commissioned an independent competent person report by TRACS International (“TRACS”) which analysed discovery contingent resources of 250 MMBOE. TRACS analysis shows Obote-1 encountered hydrocarbons at four levels between 8720 ft and 12,350 ft, while Ekoro-1 found eight hydrocarbon sands between 8260ft and 10761ft respectively. It has discovered but undeveloped oil assets with an estimated recoverable contingent resource for the block of 100 million barrels of oil equivalent (P50 as reported by TRACS, and a peak production potential rate of 30,000 barrels of oil per day.
Total farm-in fees of over $30m dollars will be paid by SacOil in several tranches upon attainment of certain milestones. The Joint Venture will carry 100 per cent of the minimum work programme cost as defined by the PSC for OPL 281.
It will be recalled that SacOil has just received R70m on February 17, 2011 from the South African government-owned Public Investment Corporation (PIC) who bought 46.7 million new shares at R1.50 each (or 7.4% of the company). SacOil, we understand, will fund the acquisition from this inflow.
In the government-owned PIC, SacOil has a shareholder with financial muscle; as the PIC manages assets of more than R910.9bn making it one of the largest investment managers in Africa.
Compliance with NSE requirements
Transcorp has duly complied with all the Listings Requirements and, accordingly, no further documentation or shareholder approval is required for the implementation of the Acquisition which becomes effective today, February 28, 2011.
Incorporated in the Republic of South Africa, SacOil is listed on the JSE Limited (“JSE”) under the Oil and Gas sub sector and has a current market capitalisation of approximately R1.22 billion (approx. £105m). The Company is also in the process of finalising its application for an Admission to the AIM market of the London Stock Exchange (LSE), resulting in a dual listing, with its primary listing remaining on the JSE.