Longboat Energy PLC Acquisition of initial production assets in Norway (6555E)

TIDMLBE

RNS Number : 6555E

Longboat Energy PLC

03 July 2023

3 July 2023

Longboat Energy plc

("Longboat Energy", the "Company" or "Longboat")

Acquisition of initial production assets in Norway

Longboat Energy, an emerging full-cycle E&P company with activities in Norway and Malaysia, is pleased to announce the acquisition of a 4.80% unitised interest in the Statfjord Øst Unit and a 4.32% unitised interest in the Sygna Unit (together, the "Statfjord Satellites") located on the Norwegian Continental Shelf ("NCS"), through its subsidiary Longboat Energy Norge AS ("Longboat Norge"), from INPEX Idemitsu Norge AS ("INPEX Idemitsu") . Longboat Norge will shortly become a joint venture between Longboat Energy and Japan Petroleum Exploration Co., Ltd ("JAPEX") on completion of the investment into Longboat Norge by JAPEX announced on 2 May 2023.

The acquisition represents Longboat's first producing assets.

Transaction highlights:

   --    Acquisition of long-term cash flow, fields expected to produce until late 2030s 
   --    Production of 300 boepd net to Longboat Norge (based on NPD figures to 30 April 2023) 

-- Production anticipated to approximately double in 2024 following a five well in-fill drilling programme, which is currently underway, and gas-lift installation which is complete

   --    Acquisition price equivalent of US$8.2/2P boe, in-line with recent NCS transactions 

-- A udited 2P reserves of 1.55 mmboe net to Longboat Norge, of which approximately 77% is oil and NGLs

   --    Cash consideration of $12.75 million 
   --    Anticipated payback on the transaction in under two years 
   --    Consideration to be fully funded by JAPEX's investment in Longboat Norge 

The Company will make a short presentation on this acquisition via the Investor Meet Company platform. The online presentation will take place at 11:00 am on Wednesday, 5 July 2023 and is open to all existing and potential shareholders. Those who wish to attend the online presentation should register in advance via this link: https://www.investormeetcompany.com/longboat-energy-plc/register-investor

A copy of the presentation is available on the Company's website (www.longboatenergy.com).

Helge Hammer, Chief Executive of Longboat, commented:

"We are pleased to announce our first production acquisition in Norway, the next step in realising our growth ambitions on the Norwegian Continental Shelf. The Statfjord Satellites are two high-quality, long-life assets undergoing an exciting and transformative redevelopment led by Equinor.

Longboat's ability to secure this acquisition through a bilateral negotiation continues to demonstrate the Company's deep relationships in Norway and is an important next step in creating a full cycle E&P company.

We would also like to thank our new joint venture partner, JAPEX, with whom we have worked in close cooperation to execute this important transaction. The Statfjord Satellites help position the enlarged business for future success and proves the benefits of joint venture concept."

Transaction detail

Longboat Norge has signed a sale and purchase agreement ("SPA") with INPEX Idemitsu to acquire a 9.60% interest in PL 089, equating to a 4.80% unitised interest in the Statfjord Øst Unit and a 4.32% unitised interest in the Sygna Unit, for cash consideration of US$12.75 million (the "Transaction"). In addition, Longboat Norge has entered into a decommissioning security agreement with INPEX Idemitsu and will pay a further deferred, post-tax consideration of US$1.75 million in equal stages over the next 18 months, which will be returned to Longboat Norge after the successful decommissioning of the Statfjord Satellites, currently anticipated in the late 2030s. The Transaction effective date is 1 January 2023.

In addition to the customary regulatory, lender and partner approvals, the Transaction is subject to the successful carve-out of Statfjord Øst and Sygna from PL 089 and the completion of the investment by JAPEX in Longboat Norge, announced on 2 May 2023. Completion of the acquisition of the Statfjord Satellites is anticipated prior to the end of 2023.

Assets overview

Statfjord Øst is located seven kilometres to the northeast of the Statfjord field in a maximum water depth of 190 metres. Statfjord Øst produces oil and gas from good quality, Middle Jurassic sandstone in the Brent Group.

Statfjord Øst began production in 1994 from two subsea production templates and one water injection template tied-back to the Statfjord C platform. The Ministry of Petroleum and Energy approved a redevelopment plan in 2021 to drill five new production wells into potentially undrained areas of the field while also adding gas-lift to increase production levels. This in-fill drilling programme is currently underway and anticipated to last until the end of 2023 and result in a material uplift to production in 2024. The field is currently anticipated to produce until the late 2030s.

In the period to 30 April 2023, Statfjord Øst had gross production of 5,200 boepd from one well, equivalent to 250 boepd net to the acquired INPEX Idemitsu working interest.

The Statfjord Øst Unit partners are Equinor Energy AS (43.25%, op), Petoro AS (30.00%), Vår Energi ASA (20.55%), INPEX Idemitsu Norge AS (4.80%) and Wintershall Dea Norge AS (1.40%).

The Sygna field is located just northeast of the Statfjord Nord field in 300 metres water depth. Sygna produces oil and gas from good quality, Middle Jurassic sandstone in the Brent Group. Originally discovered in 1996, the field began production in 2000 from three production wells tied-back via a subsea template to the Statfjord C facility. A long-reach water injection well was also drilled from the Statfjord Nord template. The field is currently anticipated to produce until the early 2030s.

In the period to 30 April 2023, Sygna had gross production of 1,300 boepd from one well, equivalent to 60 boepd net to the acquired INPEX Idemitsu working interest.

The Sygna Unit partners are Equinor Energy AS (43.425%, op), Petoro AS (30.00%), Vår Energi ASA (20.995%), INPEX Idemitsu Norge AS (4.32%) and Wintershall Dea Norge AS (1.26%).

Reserves and production

In conjunction with the Transaction, Longboat commissioned ERCE ("ERCE") to produce an independent, competent persons report ("CPR") in relation to the Statfjord Satellites, a summary is provided below:

The ERCE CPR values Longboat Norge's net entitlement 2P reserves in the Statfjord Satellites at NPV10 of US$15.3 million, based on a long-term Brent oil price assumption of US$75.7/bbl (real 2023) and an NBP gas price of 108.4 p/therm. A full copy of the CPR can be found on Longboat's website ( www.longboatenergy.com ).

Longboat anticipates the full year 2023 production to be in-line with the levels during the first four months of the year. Production is anticipated to approximately double in 2024 following the completion of the in-fill drilling programme, subject to ultimate well deliverability and success of the gas-lift project. It is Longboat's intention to provide a more detailed update on 2024 production outlook towards the end of 2023 once the drilling programme is substantially complete.

Profits

For the year ended 31 December 2022, Longboat has estimated the profits to the Company associated with the Transaction to be GBP5.6 million. Going forward, the Transaction is expected to unlock material tax synergies within Longboat Norge associated with historic corporation tax losses which ceased to be refunded by the Norwegian government following tax changes implemented in 2022. Based on Longboat Norge's internal estimates, at current commodity price levels the Transaction is anticipated to reach payback in under two years.

Financing

The Transaction and subsequent capital expenditures on the Statfjord Satellites will be funded by a combination of existing cash on hand in Longboat Norge and the pending investment by JAPEX, made up of the initial US$16 million base investment (less repayment of the intercompany loan to Longboat of approximately US$4.75 million) and the additional US$4 million contingent payment previously agreed with JAPEX which will be triggered by the Transaction. A portion of the US$100 million Acquisition Bridge Facility, provided by JAPEX in relation to its investment into Longboat Norge, is also available should it be needed.

The information contained within this announcement is considered to be inside information prior to its release.

 
 Enquiries: 
 Longboat Energy                          via FTI 
 Helge Hammer, Chief Executive Officer 
 Jon Cooper, Chief Financial Officer 
  Nick Ingrassia, Corporate Development 
  Director 
 
 Stifel (Nomad)                           Tel: [phone] 
 Callum Stewart 
  Jason Grossman 
  Ashton Clanfield 
 
 

Cenkos Securities plc (Joint Broker) Tel: [phone]

Neil McDonald

Pete Lynch

Leif Powis

 
 FTI Consulting (PR adviser)   Tel: [phone] 
 Ben Brewerton 
  Rosie Corbett                [e-mail] 
 

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.

In May 2023, the Company announced that agreement had been reached 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. Under this agreement, JAPEX will make a cash investment of up to US$50 million for 49.9% of Longboat Norge and provide the Joint Venture with a US$100 million Acquisition Financing Facility to finance acquisitions and associated development costs.

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 2022.

Review by Qualified Person

The technical information in this release has been reviewed by Hilde Salthe (Managing Director Longboat Energy Norge AS), 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

 
 "1P"       Proved reserves 
  "2P"       Proved plus probable reserves 
  "3P"       Proved plus probable plus possible reserves 
  "boe"      Barrels of oil equivalent 
  "boepd"    Barrels of oil equivalent per day 
  "Bscf"     Billion standard cubic feet 
  "mmboe"    Million barrels of oil equivalent 
 "NBP"      National Balancing Point 
  "NCS"      Norwegian Continental Shelf 
  "NPV10"    Net present value at a 10% discount rate 
 "scf"      Standard cubic feet 
 "stb"      Stock tank barrels 
 

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