Continental Focus, International Reach

Sirius Buys into Service Firm

Thursday, December 6, 2018

Nigerian firm Sirius Petroleum entered into a conditional sale purchase agreement (SPA) with service firm Precision Energy Group (PEG) to acquire a 75% stake in Precision Energy Tetra 109, a wholly owned subsidiary of PEG. The Sirius JV has in turn conditionally agreed to acquire a direct 40% equity and up to 80% economic interest in Tetrarch from Tetrarch Holdings.

Tetrarch is an 80% shareholder in Tetra Energy Services, which wholly owns Tetra Petroleum Oilfield Services (TPOS). TPOS entered into a petroleum services contract (PSC) to provide certain petroleum services to the owners of the license known as OML 109.

Once the transactions are completed and after recovery of its costs, Sirius will hold an effective indirect economic 30% interest in the cash flows of TPOS through its economic interest in Tetrarch. Subject to completion of the transactions, Sirius JV intends to provide petroleum services to Tetrarch and therefore TPOS in relation to the PSC in which Sirius and its operational partners expect to take an active role in providing such services.

There is only nominal consideration payable on the acquisition, which is conditional upon, among other things, Sirius sourcing for Sirius JV $40 million of external debt funding, to be provided by a third-party funder, to be deployed towards the execution of a minimum work program commitment (MWPC) on the Ejulebe field, a producing field located in the north-east corner of OML 109. Sirius is in advanced discussions with a third-party funder for the provision of the required $40 million debt funding, which is intended to be secured directly against the cashflows generated as a result of the Ejulebe MWPC.

The MWPC is designed to boost current production on the Ejulebe Field from around 250 bpd to over 5,000 bpd, by providing for a workover on one existing well and the drilling of one new development well, the EJ-9. In addition, the company has the option to conduct two additional workovers or side tracks of existing wells.

The next stage of the MWPC calls for the drilling of one exploration well on the EJ-WSW prospect. The prospect has an attributed gross unrisked P50 resource of between 32-38 million boe. The resource estimate is based on a CPR prepared by PanTerra Geoconsultants in December 2017.

EJ-WSW is located in close proximity to the Ejulebe field and the CPR notes that it is expected to have similar reservoir characteristics to the Ejulebe field.  In addition, the close proximity of the prospect to the existing Ejulebe production facilities would allow a fast-track development for early cash-flow in the event of a commercial discovery, and potential monetization of gas resources in accordance with the Nigerian government’s stated objectives.

Bobo Kuti, CEO of Sirius, said, “The proposed acquisition would be a significant addition to the Sirius portfolio and we look forward to working with the co-owners of the asset and our operational partners to boost production on the Ejulebe field. We are also excited to explore the EJ-WSW prospect, which, if successful, could potentially add material reserves.”