Panoro Energy has entered into a sale and purchase agreement with PetroNor, the independent oil and gas exploration and production company with a focus on production, development and exploration assets across sub-Saharan Africa, to divest all outstanding shares in OML 113 Offshore Nigeria containing the Aje oil and gas field.
The Divested Subsidiaries hold 100% of the shares in Pan-Petroleum Aje Limited (“Pan Aje”), which participates in the exploration for and production of hydrocarbons in Nigeria and holds a 6.502% participating interest, with 16.255% cost bearing interest, representing an economic interest of 12.1913% in Offshore Mining Lease no. 113 (“OML 113”). Following completion of the Transaction, Panoro will have no presence in Nigeria.
John Hamilton, Chief Executive Officer of Panoro said:
“We are extremely pleased to have reached this win-win agreement with PetroNor that perfectly suits both parties’ ambitions. Aje was a non-core asset for Panoro and allows us to further focus on expanding our organic operations in Tunisia and Gabon while retaining exposure to the considerable upside at OML 113 through the deferred consideration. We are very confident that PetroNor has the technical and financial capabilities along with the depth of expertise and vision to advance further the next ambitious development phases of Aje in a smooth and efficient aligned partnership with the operator, YFP.”
Under the terms of the Transaction, PetroNor has an option to pay a portion of the Share Consideration in cash, in an event PetroNor’s share price reduces to less than US$ 0.13 per share (based on the current number of shares in issue), at the time of completion of the Transaction.
PetroNor is in the process of finalising separate agreements with the OML 113 operator Yinka Folawiyo Petroleum (“YFP”) to create a new holding company. PetroNor will assume a lead technical and management role in order to progress the next phases of the project. Together these agreements provide the framework and pathway towards sanction of the next phases of the Aje project in order to exploit the substantial gas and liquids reserves and unlock its significant value.
Completion of the Transaction is conditional upon the execution and completion of the agreements between PetroNor and YFP, the authorisation of the Nigerian Department of Petroleum Resources and the consent of the Nigerian Minister of Petroleum Resources. Securing the authorisation and consent is expected to take several months with a long stop date agreed by the parties of 31 December 2020, following which either party is entitled to terminate the Transaction.
Following completion of the Transaction, subject to the terms agreed with PetroNor on a best efforts basis, Panoro’s intention is to declare a special dividend and distribute the Share Consideration, to the extent received in shares, to its shareholders. Further information about such a possible dividend, including the applicable record date, will be given in connection with completion of the Transaction.
Once Pan Aje has recovered all costs related to the accumulated investments incurred after the date of completion, PetroNor must pay to Panoro additional consideration of US$ 0.15 per 1,000 cubic feet of the Aje Natural Gas Sales Volume, such additional consideration being capped at US$ 25 million (the “Contingent Consideration”).
The Transaction is expected to generate a net gain for Panoro which will be accounted for in the Financial Statements of Panoro upon closing of the Transaction. The final amount will depend on the Contingent Consideration. Following completion, Panoro’s production and reserve numbers will be adjusted to reflect the sale.
Julien Balkany, Chairman of Panoro, commented:
“Panoro has been reviewing options in relation to its Nigerian assets with the objective of potentially unlocking value of OML 113 for its shareholders. This divestment is consistent with Panoro’s strategy to optimize its E&P portfolio. In addition, through the contemplated distribution of PetroNor shares to Panoro shareholders, this transaction provides Panoro’s shareholders with the opportunity to directly retain exposure to OML 113. Panoro remains fully committed to its growth strategy in Africa for the benefit of its shareholders”.
No agreements have been entered or are expected to be entered into, with shareholders in Panoro or PetroNor, Boards of Directors or senior management in connection with the Transaction.
Since Panoro’s interest in OML 113 is non-operated, the Transaction is not expected to have any impact of changes to the number of employees, key management personnel and the Board of Directors within the Company or its remaining subsidiaries.