Pura Vida Energy has entered into a conditional term sheet with a rig contractor to fund the costs of a three well, back to back drilling program on the Nkembe block, which will include an appraisal of the Loba oil field and a planned production test.Under the Term Sheet, the rig contractor will provide a jack-up rig and fund the costs of the rig for the three well program anticipated to commence in the second half of 2017 with an estimated duration of 3-4 months, including the mobilisation costs and operating day rate of the rig, in exchange for a royalty out of production from any fields discovered during the drilling campaign that are brought into production. Pura Vida will maintain its 100% ownership interest in the Nkembe permit, subject to the terms of the participation option described below.
The costs to be funded by the rig contractor are approx. US$20 million (A$26.5 million). The transaction is conditional on Pura Vida securing funding for the balance of the drilling costs for the three well drilling program from a project partner (estimated to be an additional US$20 million) and obtaining all required regulatory approvals. Pura Vida has commenced discussions with potential partners to secure the remaining funding required and meetings with the regulator concerning the approvals are being scheduled.
The value of the royalty payable to the rig contractor under the Term Sheet varies depending on the size and production rates of the relevant field(s) discovered during the 2017 Drilling Campaign.
Based on the current schedule, the rig is expected to commence operations in the second half of 2017, subject to securing a partner to fund the balance of the 2017 Drilling Campaign and receiving the necessary regulatory approvals. The first well in the 2017 Drilling Campaign will target the Loba discovery and Loba Deep prospect, which includes a planned drill stem test (DST) of the Loba discovery. The location of the second and third wells will be determined by Pura Vida, based on results, and may include prospects such as Loba East, Lepidote Deep, Pompano and Palomite Deep. The 2017 Drilling Campaign will target approx. 100 mmbo of which 12 mmbo are considered low risk appraisal testing of contingent (discovered) resources.
The transaction remains subject to a number of conditions, including:
- the parties entering into formal agreements in relation to the transaction;
- obtaining all government and regulatory approvals required in relation to the transaction and the 2017 Drilling Campaign; and
- Pura Vida obtaining the balance of funding required for the 2017 Drilling Campaign.
As part of the transaction, the formal documentation will grant an option to the rig contractor to subscribe for up to 10% of Pura Vida’s issued capital on terms to be agreed.
The term sheet provides for the rig contractor to convert the royalty interest over any particular field into direct equity in that field prior to a Final Investment Decision (FID) to develop the field based on a valuation methodology to be contained in the formal documentation.
The term sheet also includes a number of other terms and conditions usually found in an agreement of this kind.
The transaction remains highly conditional and terms may be subject to change. Further details in relation to the transaction will be provided once formal documentation is entered into.
Pura Vida believes the signing of the Term Sheet is an important step in facilitating a project partnership arrangement for the balance of the funding required for the 2017 Drilling Campaign. Pura Vida is currently marketing the opportunity to potential farminees and is offering equity in the permit to potential partners to participate in a near term, multi-well offshore drilling program which will include a production test of the existing Loba discovery as well as near field exploration potential. With the rig costs proposed to be funded by the rig contractor, Pura Vida’s primary farmout objective is to have the balance of costs funded for the three wells and also recover back costs.
Managing Director, Damon Neaves, said:
‘The proposed 2017 drilling campaign which includes three wells, including the potential for a production test of Loba to confirm a commercial flow rate to underpin development, represents an exciting opportunity that has the potential to transform Pura Vida from an explorer to a producer in the near term. Our plans to commercialise Loba and test the shallow water exploration potential of the Nkembe block are at the forefront of Pura Vida’s strategy and we are very pleased to have reached this conditional agreement to provide a rig and partial funding for those activities.
Our focus now turns to formalising the agreement and satisfying the conditions, including regulatory approvals and securing the remaining funding required. Our goal is to put the Company in a unique position with three offshore wells this year to test various targets and, subject to production test results, advance the commercialisation of Loba.(Source: Pura Vida Energy)