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consideration of USD 13 million. The acquisition price is payable in new
Interoil shares plus cash. Recoverable conventional reserves in these licenses
are estimated to exceed 8 million barrels, and they also have a significant
potential of unconventional oil.
“With this valuable transaction, Interoil makes a significant expansion that
involves the entrance into the important and dynamic Argentinian market, with
prolific unconventional resources which are attracting top world leading
exploration and production companies. The agreed transaction positions Interoil
as a key player in the Golfo San Jorge Basin, one of the most profitable
hydrocarbon regions in Latin America. This entrance constitutes a strategic
move to a new country which is aimed at broadening our portfolio and
diversifying market presence, whilst acquiring 74,000 unconventional acres and
opening new value drivers for the long-term development,” says Hugo Quevedo,
Chair of the Board of Directors of Interoil.
“Interoil’s management has proven expertise in the Argentinian oil industry and
extensive knowledge of its institutional and administrative environment which
constitutes a critical capability to unfurl the full potential of the new assets
in the mid to short term. We are also bringing new shareholders with successful
investment track record in exploration and production activity and in Latin
America to the company. We are delighted to welcome them as new shareholders,
and look forward to creating further value for all,” Mr Quevedo adds.
The concessions
The Mata Magallanes Oeste (production) and Cañadón Ramírez (exploration) are
adjacent blocks, covering nearly 380 square kilometers in the western part of
the highly productive Golfo San Jorge Basin in the southern part of Argentina.
This basin is said to hold approximately half of Argentina’s gas reserves and
twenty per cent of the country’s oil reserves. Interoil will become the operator
and hold an 80 percent working interest in these licenses in a joint venture
with Selva Maria Oil SA and Petrominera SE, the state-owned company of the
Chubut Province where the blocks are located.
The La Brea block (production) covers 112 square kilometers in the Jujuy
Province in the Northern Argentina, and comprises two promising structures, La
Brea Este and El Oculto. Interoil will also become the operator and hold 80
percent working interest in a joint venture with Selva Maria Oil SA and JEMSE,
the state-owned company of the Province of Jujuy.
“We have carefully studied these licenses and look forward to working with the
other partners to realize the potential of the blocks, both conventional and
unconventional. The proposed work program will provide Interoil with a self-
sustained Argentinian operation.” says Leandro Carbone, Chief Executive Officer
of Interoil
Work program
The initial short-term work program involves work-over operations in existing
wells in the Mata Magallanes Oeste and La Brea licenses. Work over program in
Mata Magallanes will require an estimated initial investment of approximately
USD 500,000 to recover gas-stream to fuel the oil production in the field.
Management expects that production levels will reach 150 bopd from existing
wells by year end.
In the La Brea Este the estimated initial investments required would also amount
to around USD 500,000 to evaluate behind casing oil layers through a workover
program in LBE-x1. Management believes production could reach by year end at
least 70 bopd. That would prove the existence of hydrocarbon accumulation
within La Brea Este structure and help to improve the geological hydrocarbon
potential in El Oculto structure.
During 2019, the Cañadón Ramírez block work will focus on gathering all
geological and geophysical (G&G) data and integrate them into a geology model to
further understand the hydrocarbon potential in each of the different prospects
identified within the boundaries of the block.
Unconventional Potential
The Golfo San Jorge Basin holds three well-known unconventional formations: D-
129 or Matasiete, Cerro Guadal and Anticlinal Aguada Bandera. Among them, D-
129 formation has already been successfully tested by YPF, the largest oil and
gas producer in Argentina, in the last three past years. After reviewing the
available G&G technical data, management sees significant unconventional
potential in the D-129 both in the Mata Magallanes Oeste and Cañadón Ramírez
blocks. In this light, Interoil management is strongly supporting the drilling
of two pilot unconventional wells aimed at proving the prolific D-129 formation
within the coming two years.
Transaction details
The licenses included in the agreement are currently owned by Oil Investment
Inc., a holding company registered in Panama. This company has today been
acquired by a wholly owned Norwegian subsidiary of Interoil. Oil Investment Inc.
is a single purpose vehicle with no historical activity and no material assets
other than the licenses and a working capital of USD 1,000,000. It does not have
any employees.
The total agreed consideration amounts to USD 13 million, of which 3.9 million
will be settled in cash. Of this amount 0.3 million is being paid at closing,
and the rest will be paid in three annual installments.
The remainder of the consideration, USD 9.1 million, is being settled through
issuance of a total of 22,221,851 new shares in Interoil (the “Consideration
Shares”) at a subscription price of NOK 3.55 and a USD/NOK conversion rate of
1:8.68. The number of Consideration Shares has been calculated based on a 20
percent discount of the volume-weighted average market price for the Interoil
share in the 120-day period immediately preceding closing.
The board of directors has resolved to issue the Consideration Shares based on
the authorization granted by Interoil’s Annual General Meeting in 2018.
Following the registration of the share capital increase with the Norwegian
Register of Business Enterprises, Interoil’s share capital will increase to NOK
43,456,083, divided into 86,912,166 shares, each with a par value of NOK 0.50.
6,400,000 of the Consideration Shares will become listed and tradable
immediately after delivery to the sellers, while 15,821,851 of the Consideration
Shares will be placed on a separate ISIN pending approval and publication of a
prospectus or an information memorandum, estimated to take place early June
2019.
About the sellers
Prior to the agreed transaction, Oil Investment Inc. was owned by several
private and institutional investors in Latin America. Through the transaction,
they will become significant new shareholders in Interoil.
Integra Oil and Gas S.A. will receive 7,777,648 Consideration Shares, and will
following delivery of such Consideration Shares hold 7.777,648 shares in
Interoil, equal to 8.95% of the total number of shares and votes in Interoil.
International Capital Markets Group Inc. will receive 5,555,463 Consideration
Shares, and will following delivery of such Consideration Shares hold 5,555,463
shares in Interoil, equal to 6.39% of the total number of shares and votes in
Interoil.
Mirage Partners Corp. will receive 4,444,370 Consideration Shares, and will
following delivery of such Consideration Shares hold 4,444,370 shares in
Interoil, equal to 5.11% of the total number of shares and votes in Interoil.
Brie International Development Corp. will receive 2,222,185 Consideration
Shares, and will following delivery of such Consideration Shares hold 2,222,185
shares in Interoil, equal to 2.56% of the total number of shares and votes in
Interoil.
Prifen S.A. will receive 2,222,185 Consideration Shares, and will following
delivery of such Consideration Shares hold 2,222,185 shares in Interoil, equal
to 2.56% of the total number of shares and votes in Interoil.
This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act
http://www.netfonds.no/quotes/release.php?id=20190429.OBI.20190429S144
