Petroleum Africa
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Friday, September 18, 2009
Artumas has completed a farm out from its assets in Tanzania and Mozambique. The company has farmed out the Mnazi Bay Production Sharing Agreement (PSA), its Area 1 Offshore Rovuma Block, and its Onshore Rovuma Block to Maurel et Prom and Cove Energy.
The company will now seek government and partner approval for the decision.
Under the terms of the farm out agreement for the Mnazi Bay concession in Tanzania, Maurel et Prom (M&P) will have a 38.22% participating interest in all petroleum operations save for exploration operations where M&P will take up a 47.775% participating interest, the difference being due to Tanzanian Petroleum Development Corporation’s (TPDC) 20% participating interest in all but exploration operations. The French firm will also become operator of the Mnazi Bay Concession. Cove Energy plc (Cove) will farm in to a 16.38% and 20.475% respectively in petroleum operations and exploration operations.
Once the deal is has the approval of the government Artumas’ participating interests will be 25.4% and 31.75% respectively in petroleum operations and exploration operations.
Artumas’ share of costs for a 200 sq km 3D seismic program and an exploration well will be carried by M&P and Cove. In the event that a 3D seismic program does not take place, M&P and Cove will carry Artumas for an alternative exploration or appraisal program of equal cost to the seismic program.
Artumas also reported that it may elect that Maurel et Prom and Cove fund Artumas’ share of either of two appraisal wells, in which case a further 5% participating interest in petroleum operations will be assigned to the two firms, per well.
M&P will assume operatorship of all petroleum operations under the PSA and accordingly will undertake to fulfill the arrangements currently in place for the supply of gas to the Mnazi Bay Gas to Electricity Project.
In Mozambique on the Offshore Area 1 Rovuma Block, Cove will acquire Artumas’ entire 8.5% participating interest and will accordingly assume all costs associated with Artumas’ participating interests from the effective date of July 1, 2009. Artumas will in consideration receive a royalty amounting to 6.4% of Cove’s profit petroleum accruing to the 8.5% participating interest. Should Cove pay further cash calls prior to completion of the transaction, Artumas’ royalty will reduce by 0.5% per $1 million of expenditure subject to a floor of 4% of Cove’s profit petroleum.
On the Onshore Rovuma Block Maurel et Prom and Cove will respectively farm in to a 24% and 10% participating interest in the Block. Artumas’ participating interest will thus become 15.3%. Artumas’ share of costs for the one exploration well that is an obligation well under the Exploration and Production Concession Contract will be carried by the two firms. Should they pay further cash calls prior to completion of the transaction, Artumas’ participating interest will reduce by 1% per $1 million of expenditure subject to a floor of a 10% participating interest.
In addition to the farm in considerations, Artumas will receive a total cash consideration amounting to $10.98 million for the three transactions. All three transactions are subject to the approval of the relevant government entities and joint venture partners. In addition, approval by Artumas’ Bondholders is required and a Summons Letter will be posted shortly to Bondholders calling a meeting to approve the transaction as required by the instrument governing the Bonds. A further condition precedent is that Cove’s shareholders approve and Cove’s new shares are admitted to the London Stock Exchange by 30 October 2009.
Cam Barton, Artumas CEO stated: “This transaction has the capacity to transform Artumas from a position of distress to one where the company will be carried through very significant exploration programs in all of its assets which have a reasonable chance to materially add value through exploration success. At the same time the transfer of operatorship in the Tanzanian PSA to Maurel et Prom will reduce overheads whilst maintaining the obligations of the PSA joint venturers to supply gas to the Mnazi Bay power plant which Artumas will continue to run.”
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