Agreement to sell Spanish oil assets and farm-out of first Swiss Project
Ascent Resources Plc, the AIM-traded oil and gas exploration and production company, has entered into an agreement to sell its oil assets in Spain and to farm-out up to 40% of its 90% interest in the Seeland-Frienisberg Permit in the Canton of Berne in Switzerland, to AIM listed Leni Gas and Oil Plc (LGO).
Under the proposed agreement, Leni Gas and Oil Plc (LGO) will purchase Ascent’s Spanish oil assets and the entire issued share capital of Ascent’s wholly owned subsidiary Compania Petrolifera de Sedano (CPS). These assets have a book value of £321,000 and have an operating profit from production of £241,000. The consideration of €2.25 million and 8 million ordinary LGO shares will be partially used to repay outstanding intercompany loans in Spain.
Ascent’s Spanish oil assets include 88.75% of the Ayoluengo field in the La Lora concession and CPS, which has a 50% interest in three exploration licenses, Huemeces, Basconcillos-H and Valderedibles. These licenses are held on a 50:50 basis with Tethys Oil AB of Sweden. This divestment is in line with Ascent’s strategy of focussing on its gas assets, which the Board believes provides greater stability due to the strength of the mainland European gas market.
The acquisition of these assets by LGO constitutes a reverse takeover under the AIM Rules and is therefore conditional (inter alia) upon LGO gaining approval from its shareholders. Ascent is retaining a presence in Spain with its 50% interest in the Rocamundo gas exploration application, where the Company’s partners are Tethys Oil and Shesa, the Basque oil company, who have a 30% interest and a 20% interest respectively. This exploration permit is expected to be issued later this year.
In Switzerland, Ascent has conditionally agreed to farm-out up to 40% of its 90% interest in the Seeland-Freinisberg Permit in north-western Switzerland to LGO. Schweizerisches Erdöl AG (‘SEAG’) is the concession holder with a 10% interest. Under the terms of the farm-out, LGO will fund the costs of the drilling and testing of the first well in the exploration permit. Expenditure on subsequent exploration and production activities in this permit will be funded on a working interest basis.
If LGO takes up its full 40% interest, it will additionally have the right of first refusal to participate in Ascent’s other two Swiss projects on the same terms. The 363.5 square kilometre surface prospecting permit was awarded in July 2005, and the first exploration phase expires on December 31st 2007 with a three year extension pending. The first phase work commitments which have been completed, includes a spectral acoustic seismic trial, geochemical field studies and integration of the existing geological and geophysical data.
In 1982, Elf drilled the Hermrigen-1 well within the area of the permit to a total depth of 2,425 meter in Triassic salt. Gas shows were encountered in the lower carbonate section of the Keuper and a test in the section of the well flowed gas at an initial rate of 1.5MMscfd decreasing to 0.62MMscfd after 15 hours. The Competent Persons Report commissioned by LGO, states that Gross Contingent Resources associated with the Hermrigen-1 discovery well are between 10.7 Bcf and 21.2 Bcf and that six other prospects in the permit have Prospective Resources totaling between 347.7 Bcf and 676.5 Bcf.
The partner group will choose the location of a well designed to prove commercial gas reserves in this permit. Subject to regulatory approval, it is planned to drill this well using the new build, low environmental impact hydraulic rig of Perazzoli Drilling, a drilling contractor in which Ascent has acquired a 22.5% interest. Ascent Managing Director Jeremy Eng said, „The divestment of Ascent’s Spanish oil assets follows both the Company’s strategy of preferentially developing its gas projects as well as its belief that these properties are non-core compared to the potential of the other opportunities in Ascent’s portfolio.
Importantly, it is expected that during 2008, revenues from gas production in Hungary will more than replace the oil sales revenues from the Spanish production. „The Swiss farm out allows us to progress this project and build our confidence in what we believe has the potential to be a major central European gas play. Both of Ascent’s exploration permits in Berne have proven gas discoveries and the third party report confirms substantial appraisal and exploration prospects.
We look forward to working with LGO in an exploration program to quantify the Prospective Resources estimates, which in only the first of three permits, stands at between 348 Bcf and 676 Bcf of gas.” The information contained in this announcement has been reviewed and approved by Gavin Ward, Ascent’s Exploration Manager (member of the AAPG) who has 19 years relevant experience in the oil and gas industry. (resourceinvestor)
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