TIDMBOIL
RNS Number : 0674X
Baron Oil PLC
18 December 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF REGULATION 11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT)
REGULATIONS 2019/310
18 December 2023
Baron Oil Plc
("Baron", or the "Company")
Memorandum of Understanding signed for Chuditch Farm-Up with
Timor Gap
Baron Oil Plc (AIM: BOIL) is pleased to announce a proposed
assignment (the "Farm-Up") of a 15% working interest in the
TL-SO-19-16 Production Sharing Contract (the "Chuditch PSC" or the
"PSC"), offshore Democratic Republic of Timor-Leste to TIMOR GAP
Chuditch Unipessoal Lda. ("TIMOR GAP"), the existing Joint Venture
partner on the PSC and a wholly owned subsidiary of TIMOR GAP E.P.
the Timor-Leste National Oil and Gas Company.
Baron's wholly owned subsidiary, SundaGas Banda Unipessoal Lda.
("SundaGas") has entered into a Memorandum of Understanding (the
"MOU") with TIMOR GAP, which details the proposed Farm-Up. The
terms of the MOU constitute a binding obligation on the Parties to
enter into the Farm-Up, subject to and conditional on the
satisfaction of two Conditions Precedent, as described below.
The Directors consider that the Farm-Up by TIMOR GAP will have a
value to Baron of approximately US$8.5 million in reimbursement for
prior costs and in the offset of future spend. Furthermore, the
Directors believe that the Timor-Leste Government's validation and
commitment will both support and progress our preparations for the
planned Chuditch-2 appraisal well as well as advance our financing
plans for Chuditch-2, where discussions continue with other
potential funding partners.
The Proposed Farm-Up
Pursuant to the MOU, on completion of the Farm-Up
("Completion"), SundaGas, will retain operatorship and hold a 60%
working interest in the Chuditch PSC, while TIMOR GAP will have a
40% interest, made up of a new paying 15% interest, plus its
original 25% interest which is carried to first gas. Therefore,
from Completion, TIMOR GAP will be responsible for paying 20% of
all costs, including the drilling of the planned Chuditch-2
appraisal well. In 2024, this contribution is estimated to be
around US$7.5 million.
Under the MOU, on Completion SundaGas will also receive cash
payments from TIMOR GAP which are estimated to be approximately
US$1 million relating to back costs covering the period from the
signing of the PSC to the anticipated date of Completion.
The Farm-Up Agreements will be subject to two conditions
precedent ("Conditions Precedent") of (i) approval of the Farm-Up
by the Board of Directors of TIMOR GAP E.P. and (ii) approval of
the Farm-Up by Timor-Leste's National Petroleum Authority (
Autoridade Nacional do Petróleo or "ANP").
The transfer of the 15% working interest from SundaGas to TIMOR
GAP will not occur until the Farm-Up Agreements have been executed
and the Conditions Precedent have been fulfilled.
The MOU is governed by the laws of Timor-Leste.
The MOU shall terminate with immediate effect on the execution
of the Farm-Up Agreements or midnight on 31 January 2024 (whichever
is the earlier to occur), unless extended by the parties.
Transaction and Timing
The Directors anticipate that the Farm-Up should be a more
straightforward transaction than a farm-in from external partners,
given that TIMOR GAP is already party to the PSC and its Joint
Operating Agreement and Baron has a good working relationship with
the various Timor-Leste petroleum authorities, all of whom are
supportive and have been involved in the Farm-Up discussions. In
addition, as TIMOR GAP already has full access to all PSC
documentation and data applicable, it is not expected that there
will be a requirement for significant additional due diligence in
relation to the Farm-Up.
The operational plan remains to drill and flow test the
Chuditch-2 appraisal well in late 2024, subject to rig and drilling
services availability and the completion of drill financing.
Planning for Chuditch-2 Appraisal Drilling
As the Company highlighted in its announcements of 11 October
2023 and 30 November 2023, a location has been selected for the
drilling of the Chuditch-2 appraisal well and significant progress
has been made in preparation for the drilling campaign.
Subsequent to those announcements, a further drilling planning
workshop has been held with ANP and SundaGas continues to develop
its full operational plans. The cost of the Chuditch-2 appraisal
well is anticipated to be approximately US$32 million, including
the costs of a full production flow test. The updated well cost is
based on up-to-date market intelligence on contractual rates for
drilling rigs, logistics, fuel, testing equipment and all services
and personnel requirements for the execution of the appraisal
campaign. It also includes mobilisation and demobilisation costs
for the rig and equipment. The previously indicated drilling cost
estimate of US$24 million was prepared in late 2021, prior to
recent inflationary pressures and in a looser market for drilling
services in the region. Earlier indications of costing also
excluded mobilisation and certain other costs.
With TIMOR GAP's commitment via the MOU for the Farm-Up,
SundaGas will seek to advance discussions and assessments of
suitable rigs, equipment and personnel. On entry into Contract Year
3 of the PSC, the commitment will be to drill an appraisal well
within a 12-month period.
Rui Maria Alves Soares, President and CEO of TIMOR GAP, E.P.
commented:
"I am pleased that TIMOR GAP is able to deepen its involvement
in PSC TL-SO-19-16 in close collaboration with our partner
SundaGas. All the technical efforts to date are encouraging for
successful appraisal drilling of the Chuditch field and for the
exciting potential to come from the adjacent exploration prospects.
As partner, we support SundaGas in moving ahead with the appraisal
well and will take part in the necessary services that TIMOR GAP
can offer during the drilling campaign as well as encouraging
participation of other local service providers throughout
operations in the Chuditch PSC. We look forward to developing our
strong partnership as we mature the Chuditch gas resources for the
benefit of Timor-Leste."
Andy Yeo, Chief Executive of Baron Oil Plc, added:
"We are delighted with, and greatly appreciate, TIMOR GAP's
decision to increase its participation in the Chuditch PSC through
a paying interest. The proposed Farm-Up is a major step forward, as
it provides validation of the project as well as bringing in an
early funding partner for the appraisal programme. It also reflects
the Timor-Leste Government's commitment to the development of the
country's petroleum resources and its support for our efforts.
"From here, we will advance our drilling planning for the
appraisal well which will include discussions with other potential
funding partners. With this proposed Farm-Up, we move a long way
forward towards drilling Chuditch-2, whilst retaining operatorship
and a majority interest in the PSC."
For further information, please contact:
Baron Oil Plc +44 (0) 20 7117 2849
Andy Yeo, Chief Executive
Allenby Capital Limited +44 (0) 20 3328 5656
Nominated Adviser and Joint Broker
Alex Brearley, Nick Harriss, George Payne (Corporate
Finance)
Kelly Gardiner, Stefano Aquilino (Sales and Corporate
Broking)
Cavendish Capital Markets Limited +44 (0) 131 220 6939 / +44 (0) 207 397 8900
Joint Broker
Neil McDonald, Pearl Kellie (Corporate Finance)
Leif Powis (Sales)
IFC Advisory Limited +44 (0) 20 3934 6630
Financial PR and IR baronoil@investor-focus.co.uk
Tim Metcalfe, Florence Chandler
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