Independent oil and gas production and development company Block Energy, quoted by AIM, has taken a step to enter a new geographical area through an investment related to two Production Sharing Contracts (PSCs), which will enable it to expand its portfolio to include two offshore licenses in Gabon.
Block Energy has entered into a conditional agreement with Pilgrim Exploration for investment related to road and I’m here The Gabon production sharing contracts will be funded through a proposed fundraising of new ordinary shares worth $6.3 million (about £4.65 million) to be completed in two closing transactions.
Paul HaywoodBlock Energy CEO commented: “This transaction represents an excellent value-accretive acquisition of high-potential discovered oil and exploration in a well-known oil producing jurisdiction. With an excellent data set and very encouraging drilling activity by previous operators, we believe the asset combines a fundamental development opportunity with significant upside and broad operating acreage.”
“With recent on-farm progress on both Project III and Project IV in Georgia, we believe the Gabon deal provides jurisdictional and geological diversification as well as real near-term growth potential for the portfolio, and I look forward to updating shareholders on the progress of the technical work program in due course.”
The Gabon deal adds new value to the company’s existing assets in Georgia, which cover an area of 5,331 square kilometers across two adjacent offshore licences. Given the four historic oil discoveries across licenses as well as the broader upside in the pre-salt and post-salt phase, the near-term focus is on resource evaluation, development planning, and partner discussions for drilling.
The company claims the deal represents an attractive, low-cost entry into an asset with discovered oil and significant upside potential in an established jurisdiction. This acquisition is supported by Block’s existing technical and operational capabilities and leverages the Board’s West African experience to deliver shareholder value.
The proposed fundraising of US$6.3 million at a price of 1.1 pence per share includes a placement which will be conducted via an accelerated book building that will be launched immediately after the announcement and a split offer of up to 13,636,363 shares to raise £150,000 to existing shareholders only.
The convertible loan to be made to Pilgrim, which has a 90% stake in the underlying Ndjila and Mpari PSCs in Gabon, will see Block retain a 76.5% economic interest in the PSCs, subject to any required regulatory approvals. The remaining 10% in both licenses is owned by the State of Gabon.
Simon BarryCEO of Pilgrim Exploration said: “Firstly, we would like to thank the Gabonese Ministry of Oil and Gas for the excellent opportunity provided to Pilgrim and to the DGH staff, whose dedication and professionalism were instrumental in securing Pilgrim for private security companies.
“Secondly, we welcome Block Energy, which from the beginning saw the potential in Gabon and in particular the Pilgrim assets. We look forward to building on this partnership and implementing the business program to the benefit of all.”
The Ndjila and Mpari PSCs are located offshore Gabon in the North Gabon Basin, a mature hydrocarbon province with well-established operators, export routes and a long production history. The licenses contain four historic oil discoveries drilled by previous operators, including Texaco, Shell and Tulu.
the Iguija field This field is the core field within the acquired portfolio, where Shell has completed historic work on the development concept and testing of exploratory wells at rates of 3,300 barrels of oil per day. The licenses also include three other oil discoveries that Block will evaluate for potential follow-on development.
The area is viewed as offering significant upside potential, with several leads and prospects identified in both pre-salt and post-salt sections. The PSCs are supported by a large data set, including near-complete coverage with a recent 3D seismic survey acquired in 2017, which is expected to materially support potential maturity and development planning within the Pilgrim Work Programme.
Recent investments by companies such as Exxon, BP and Trafigura in Gabon are seen as boosting confidence in the country’s underground advantages. Block believes that strong interest will be generated in private security companies in Ndjila and Mbare to fund development at asset level following the TAP. Under the terms of the convertible loan agreement, Pilgrim will remain the operator of the publicly traded companies in Gabon, with technical support from the AIM-listed player.
The initial work programme, which has been approved, includes subsurface interpretation and data integration; Improving the concept of Iguiga development; and evaluation of the other three oil discoveries: Equata, Topaz, and Pilot; License-level mapping, including pre-salt classification and probabilities; and prepare assets for asset-level financing of development and exploration work programmes.
Following the successful conclusion of the fundraising, Block will loan up to $6 million to Pilgrim to fund commitments related to the PSC and initial work program. The company may choose to convert the loan into an 85% stake in Pilgrim, an 85% stake in public joint stock companies, or any other legal alternative, subject in each case to the agreed upon mechanisms and all necessary governmental and regulatory approvals, if necessary.
These conversion options are equivalent to the AIM-listed company having a 76.5% stake in public joint stock companies, while Pilgrim (13.5%) and the State of Gabon (10%) retain the remainder. Block will provide non-cash support to Pilgrim of up to $4 million by making its staff and resources available.
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