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Proposed Disposal of Sugarloaf AMI Project for a Consideration of up to US$71.5 million
Empyrean Energy PLC (AIM:EME.L), a profitable US onshore oil, gas and condensate exploration, development and production company with assets in Texas and California, has announced that it has entered into a conditional purchase and sale agreement with Carrier Energy Partners II, LLC, a Delaware corporation, to dispose of all of its right, title and interest in the Sugarloaf AMI development for an initial cash consideration of US$61,500,000.
The Company may also receive, in certain circumstances further set out below, a contingent consideration of a maximum of US$10,000,000. Empyrean currently has a 3% working interest in the Sugarloaf AMI Project, which is operated by Marathon Oil Company, a subsidiary of US major Marathon Oil Corporation (NYSE:MRO).
CEP II is a Houston, Texas based private oil and gas company focused on the acquisition and exploitation of upstream assets. Backed with an equity commitment from Riverstone Holdings LLC, its primary objective is to partner with select operators that are developing both unconventional and conventional reservoirs in North America.
Subject to Closing, the Transaction has an effective date of 1 October 2015 and is expected to close in the first quarter of 2016. Following the Transaction, the Company’s portfolio will comprise a 58.084% working interest in the Eagle Oil Pool Development Project, located in the San Joaquin Basin in southern California; a 7.5% WI in two producing wells and lesser interests in another six producing wells located in the Sugarloaf Block A operated by ConocoPhillips and; a 10% WI in the Riverbend Project, located in the Tyler and Jasper counties, onshore Texas, further details of which are outlined below.
The value of the Transaction means that at, and subject to, Closing, the Transaction would be deemed to be a disposal resulting in a fundamental change of business of the Company under Rule 15 of the AIM Rules. Accordingly, Closing of the Transaction is conditional on the approval of Shareholders at a General Meeting. The Company intends to post a circular to Shareholders and a notice convening a General Meeting as soon as possible.
The Company confirms that it has received irrevocable undertakings from certain Shareholders to vote in favour of the Transaction in respect of a total of 23.6 per cent. of the Company’s issued share capital. This includes irrevocable undertakings from Tom Kelly, Chief Executive Officer, who is interested in 20,881,563 Ordinary Shares, representing approximately 9.4 per cent. of the Company’s issued share capital, and Messrs Knight, Appleby and Farthing who are interested, in aggregate, in a further 31,552,595 Ordinary Shares, representing approximately 14.2 per cent of the Company’s issued share capital.
Empyrean CEO, Tom Kelly, said:
“This Transaction crystallises the value of the Sugarloaf AMI Project at a time when there are significant challenges facing the resources sector in general and, specifically, when the additional financing required to support the Company’s continued participation in the development of the Asset in the current low oil price environment would incur either an unacceptable cost or unacceptable dilution when compared with the Transaction. In line with the Board’s stated strategy, the last year has seen the Company, led by our partner, Marathon, continue to demonstrate the future upside potential of the Sugarloaf AMI Project and deliver significantly-increased reserves and resources. We believe that we have reached the right time to realise the value of the Sugarloaf asset and de-risk our position against continued depressed oil prices. I hope Shareholders will share in my excitement for the Transaction and the opportunities it may unlock in respect of the Company’s remaining assets and others that may arise at a time when drilling and associated costs are significantly reduced and a number of operators and market participants are financially distressed. Subject to the successful completion of the Transaction, we will retain our interests in three further prospective exploration and development projects in the USA, and as a debt-free entity with sufficient working capital, we will be well placed to further develop those assets and build value in the future.”
