Verus Petroleum has signed a sale & purchase agreement (SPA) for the acquisition of Cieco Exploration & Production (UK) Limited, a wholly owned subsidiary of ITOCHU Corporation.
The $400-million acquisition includes a 23.1% interest in the Western Isles Development Project, a 25.8% interest in the Hudson field, a 2.0% interest in the Brent Pipeline System, and a 1.2% interest in the Sullom Voe oil terminal.
The acquisition will add approximately 11,000 barrels of oil equivalent per day (boepd) to Verus’s daily production. The acquired entity is an asset holding company and the transaction does not involve the transfer of any personnel.
The transaction will be funded by a combination of equity, existing cash reserves and debt. Equity will be provided by HitecVision, the majority owner of Verus. Verus’s leading lender Nedbank Limited supports the transaction and the existing Reserves Based Lending (RBL) Facility will be increased and amended to allow for the participation of a group of additional banks who are also supportive of the transaction.
Alan Curran, chief executive of Verus Petroleum, said: “Verus is pleased to have signed this SPA with ITOCHU, which is aligned with our strategy to expand our production base and cash flow through the acquisition of high quality production assets. We are delighted to acquire high value barrels with the Western Isles production in particular having very low lifting costs and being a long-life asset with strong cash generation.
“This transaction builds on our Boa oil field acquisition in 2017, and our acquisition of interests in the Alba oil field and the Babbage gas field earlier this year. The combined Alba, Babbage and Cieco acquisitions increase our net production to around 18,000 boepd.
“The Western Isles development includes the Harris and Barra oil fields. Production has exceeded expectations since it started in November 2017 and is currently on plateau at in excess of 40,000 boepd, with an estimated field life of 15 years.
“HitecVision’s continued support provides Verus with a solid capital base which is a robust foundation for further growth.”
The transaction is subject to customary regulatory approvals and is expected to complete in the fourth quarter of 2018.
In support of its growing business, Verus is relocating to new offices in the Silver Fin building on Aberdeen’s Union Street later this year. The move will allow Verus to bring its team together in a modern, open plan working environment that will support the ongoing expansion of its business, and further demonstrates its commitment to Aberdeen and the North Sea.