TIDMLBE
RNS Number : 9834X
Longboat Energy PLC
02 May 2023
2 May 2023
Longboat Energy plc
("Longboat Energy", "Longboat" or the "Company")
Transformational Investment to Create a Norwegian Joint Venture
with JAPEX
Longboat Energy, the emerging full-cycle E&P company, is
pleased to announce that it has reached agreement with Japan
Petroleum Exploration Co., Ltd ("JAPEX") to make a significant
investment into its Norwegian subsidiary, Longboat Energy Norge AS
("Longboat Norge"), to form a joint venture.
The joint venture will be renamed Longboat JAPEX Norge AS
("Longboat JAPEX" or the "Joint Venture"), with a goal of building
a leading Norwegian-focussed independent.
Transaction highlights
Cash investment of up to US$50 million for 49.9% of Longboat
JAPEX comprised of:
-- cash investment on completion of US$16 million;
-- a contingent consideration of US$4 million, payable on successful
completion of a production acquisition currently under review;
and
-- a further tranche of up to US$30 million, payable on a sliding
scale following a successful discovery on the Velocette exploration
well due to spud in Q3 2023.
JAPEX to provide the Joint Venture with a US$100 million
Acquisition Financing Facility:
-- five-year facility to finance acquisitions and associated development
costs in pursuit of the Joint Venture's strategy; and
-- interest rate based on a sliding scale with an all-in cost over
the term of <10%.
JAPEX, founded in 1955, is a public company listed on the Tokyo
Stock Exchange (m/cap US$1.8 billion) with proved reserves of 159
mmboe (2022/3) and production of 58,500 boepd (FY22). JAPEX's
largest shareholder is the Japanese government (35%) via the
Minister of Economy, Trade and Industry of Japan.
Longboat JAPEX will pursue a growth-led strategy to create value
predominantly through the acquisition of development projects,
growing 2P reserves and reaching a significant production level
within three to five years. The Joint Venture will continue to
target the drilling of one to three exploration and appraisal wells
per year.
Helge Hammer, Chief Executive of Longboat, commented:
"Longboat is delighted to have found a strong and complementary
strategic partner in JAPEX. JAPEX has been looking for the best way
to enter Norway and identified Longboat as an excellent match to
reach its strategic objective.
"The Longboat team has significant experience and expertise in
the Norwegian E&P sector and has strong local industry
relationships. JAPEX is a long-established E&P company with a
strong balance sheet and significant worldwide technical competence
including in the North Sea. By joining forces, we will have greater
opportunities and strong financial backing to pursue them. We
believe that this agreement has laid the foundations for exciting
growth in the coming years.
"We are also pleased to be in a strong position to continue to
pursue our interests in the Kveikje area as this development
project is being matured and additional value created.
"The team looks forward to delivering production and reserves
growth to create value for shareholders both in Norway with JAPEX,
but also in Malaysia following our recent entry into the
region."
Masahiro Fujita, President and CEO of JAPEX, commented:
"JAPEX is very pleased that we have formed the partnership with
Longboat for a Norwegian E&P business. We see a very strong
alignment in the business expansion strategy in Norway and believe
the combination of the Longboat team's significant experience and
expertise in Norway and JAPEX's technical and financial competence
will be very beneficial in pursuing such a strategy.
"I look forward to working closely with the Longboat team in
pursuit of our common growth strategy in Norway."
Transaction Detail
Longboat has agreed to a significant investment from JAPEX into
its Norwegian subsidiary, Longboat Energy Norge AS, to create an
incorporated joint venture to be renamed Longboat JAPEX Norge AS .
The Joint Venture will pursue a growth-led strategy to create value
through the acquisition of development projects, 2P reserves growth
and establishing a significant production level within three to
five years. The Joint Venture will continue to target the drilling
of one to three exploration and appraisal wells per year.
In return for a 49.9% interest in Longboat JAPEX, JAPEX will
make an investment totalling up to US$50 million (together the
"Investment"). The investment will be made in up to three tranches
with the initial cash investment of US$16 million payable in full
on completion of the transaction along with a completion adjustment
based on a Locked Box approach from the Investment effective date
of 1 January 2023 (which is anticipated to generate a small
positive cash payment to Longboat JAPEX).
The second tranche of US$4 million is contingent and becomes
payable on the successful negotiation and completion of small
production acquisition, under current contemplation, in-line with
the Joint Venture strategy (the "Contemplated Acquisition"). The
Contemplated Acquisition remains subject to final negotiation and a
number of key conditions, and there is no certainty the
Contemplated Acquisition will reach completion, in which event the
associated investment will fall away.
The third tranche (the "Velocette Tranche") of up to US$30
million is contingent on a successful discovery on the Velocette
prospect, located in licence PL1016, and anticipated to drill in Q3
2023, targeting Gross Mean Resources of 177 mmboe(1) with a 30%(1)
Chance of Success. The amount payable under the Velocette Tranche
is based on a sliding scale of US$/boe values (zero to US$30
million) applied to the gross resources approved for development by
the Norwegian Ministry of Petroleum and Energy. The scale has a
minimum of 85 mmboe and maximum of 200 mmboe.
As part of the Investment, JAPEX will provide the Joint Venture
with a five-year, US$100 million Acquisition Financing Facility
(the "Facility") to finance acquisitions and associated development
costs. The Facility will be available for drawing for the first
three years subject to certain conditions, including mutually
agreed acquisitions by the Joint Venture. The Facility will attract
a market-rate of interest on an increasing scale over its tenor
with an initial rate of 6% in the first year and an all-in cost
over the term of less than 10%.
The Norwegian oil and gas industry continues to be very active
with record high production levels at circa 4 million boepd, a
continued high level of exploration and appraisal drilling activity
at 30-40 wells year, and a high level of field development
activity, where many new projects have been sanctioned recently and
several new projects are now being matured towards final investment
decisions. This very high level of activities implies a substantial
M&A opportunity set, which represents the main targets for our
new Joint Venture to deliver value creation and growth.
Furthermore, Norway continues to offer an attractive regulatory
framework including a recent change in the Petroleum Tax System,
which has resulted in significantly improved economics of new
development projects. The main elements of the new system are the
introduction of immediate expensing of investments, 71.8% repayment
of all losses in the following year (compared to previously 72% of
exploration losses only) and a corporate tax at 6.2% carried
forward against future profits. The marginal tax rate remains
unchanged at 78% but return on investments in development projects
is significantly improved and the total capital requirements
substantially reduced.
The Investment remains subject to customary regulatory, lender
and partner approvals. Completion of the Investment is anticipated
during the third quarter of 2023.
The information contained within this announcement is considered
to be inside information prior to its release.
Investor Conference Call
An updated corporate presentation is available on the Company's
website and the management will also present to shareholders
via the Investor Meet Company platform at 11.00 AM on Wednesday,
3 May 2023 which is open to all existing and potential shareholders.
If you wish to attend the online presentation you should register
for the event in advance via this link:
https://www.investormeetcompany.com/longboat-energy-plc/register-investor
Enquiries:
For further information, please contact:
Longboat Energy
Helge Hammer, Chief Executive Officer via FTI
---------------------------------
Jon Cooper, Chief Financial Officer
---------------------------------
Nick Ingrassia, Corporate Development Officer
---------------------------------
Stifel Nicolaus Europe Limited (Nominated
Adviser and Joint Broker)
---------------------------------
Callum Stewart Tel: +44 20 7710 7600
---------------------------------
Jason Grossman
---------------------------------
Simon Mensley
---------------------------------
Ashton Clanfield
---------------------------------
Cenkos Securities plc (Joint Broker)
---------------------------------
Neil McDonald Tel: +44 20 7397 8900
---------------------------------
Pete Lynch
---------------------------------
Leif Powis
---------------------------------
FTI Consulting (PR adviser)
---------------------------------
Ben Brewerton Tel: +44 20 3727 1000
---------------------------------
Rosie Corbett longboatenergy@fticonsulting.com
---------------------------------
Background
Longboat Energy was established at the end of 2019 to create a
full-cycle E&P company through value accretive M&A and
near-field exploration. Since June 2021, Longboat has entered a
series of four transactions to acquire interests in a portfolio of
nine, gas-weighted exploration wells drilling on the Norwegian
Continental Shelf close to existing infrastructure. To date, eight
of these wells have been drilled resulting in five hydrocarbon
discoveries, representing a technical 63% success rate.
In February 2023, Longboat entered Malaysia through the award of
a Production Sharing Contract for Block 2A, offshore Sarawak. Block
2A covers approx. 12,000km(2) and is located in water depths of
between 100-1,400 metres where a number of large prospects across
multiple plays have been identified, with significant volume
potential representing multiple trillions of cubic feet of gas.
Longboat's activities remain focused on creating a portfolio
with a clear low-cost route to monetisation and low-carbon drilling
and development opportunities, well aligned to Longboat's ESG
targets which includes a corporate 'Net Zero' on a Scope 1 and 2
basis by 2050.
Standard
Estimates of reserves and resources have been prepared in
accordance with the June 2018 Petroleum Resources Management System
("PRMS") as the standard for classification and reporting with an
effective date of 31 December 2020.
Review by Qualified Person
The technical information in this release has been reviewed by
Hilde Salthe, Managing Director Norge, who is a qualified person
for the purposes of the AIM Guidance Note for Mining, Oil and Gas
Companies. Ms Salthe is a petroleum geologist with more than 20
years' experience in the oil and gas industry. Ms Salthe has a
master's degree from Faculty of Applied Earth Sciences at the
Norwegian University of Science and Technology in Trondheim.
Glossary
"2P Reserves" The sum of proved and probable reserves. Denotes the
best estimate scenario of reserves
"boe" Barrels of oil equivalent
-----------------------------------------------------
"boepd" Barrels of oil equivalent per day
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"mmboe" Million barrels of oil equivalent
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END
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