Congo Interests Acquisition

7 Jun 2006 07:02

Afren PLC07 June 2006 AFREN PLC Acquisition of Heritage Oil Corporation's interests in the Republic of Congo London, United Kingdom - 7 June 2006: Afren PLC ("Afren" or "The Company"),announces it has entered into an agreement with Heritage Oil Corporation ("Heritage") to acquire the entire issued share capital of Heritage Congo Limited, which holds Heritage's interests in the Republic of Congo (Brazzaville). ACQUISITION HIGHLIGHTS • Heritage's Congo interests: - 25% interest in the Kouakouala A production permit - 14% interest in the La Noumbi exploration licence - 30% interest in the Mengo field on the Kouakouala B development permit. • All licences are located close to the M'Boundi Field (1.4 billion barrels of oil originally in place), one of the largest onshore fields in Africa, which currently produces over 65,000 bopd. • The cash consideration for the acquisition is US$28 million together with 2,000,000 warrants in Afren. IMPACT ON AFREN • Immediate production (25% interest of 1,093 bopd gross Kouakouala field production) • High impact exploration potential on the La Noumbi licence with 2,830 sq km of under-explored acreage (Afren: 14%) • Share of potential of the Mengo Field which has 2 billion barrels of oil in place (Afren: 30%) • Strategic entry into Congo • Continuation of pan-African diversification strategy AFREN POST ACQUISITION • Diversified portfolio of 10 assets in the Joint Development Zone of Nigeria Sao Tome and Principe, Nigeria, Gabon and Congo • Production: Kouakouala in Congo • Near term development: 15,000 to 20,000 barrels of oil per day by 2008 from Ogedeh, Okoro and Setu Fields in Nigeria • High impact exploration: La Noumbi in Congo and Block 1 of the Joint Development Zone of Nigeria Sao Tome and Principe • Low cost exploration: Iris Marin, Themis Marin and Ibekelia in Gabon Brian O'Cathain, Chief Executive of Afren, commented: "This acquisition is very exciting for Afren, providing a strategic entry intoCongo and further diversification of Afren's West African portfolio. Theacquisition delivers immediate production and cash flow together with highimpact exploration in one of Africa's most prolific on-shore basins. The LaNoumbi licence is adjacent to and on trend with the M'Boundi field, one of thelargest onshore oilfields in Africa. Afren is delighted to be in Congo, andlooks forward to working closely with the national oil company SNPC and theCongolese authorities to develop other opportunities in Congo. This complements the recent announcement of a significant agreement with Amni inNigeria for the development of two proved undeveloped fields of 30 to 60 millionbarrels and follows the announced Obo-1 discovery on Block 1 of the JointDevelopment Zone. Since the IPO in March 2005, Afren has expanded its WestAfrican presence to the Joint Development Zone of Nigeria Sao Tome andPrincipe, Nigeria, Gabon and Congo, growing its portfolio to ten assets with acombination of production, near term development and high impact explorationopportunities". 7 June 2006 Acquisition of Heritage Oil Corporation's interests in the Republic of Congo Afren is acquiring the entire issued share capital of Heritage Congo Limited,which holds Heritage's interests in the Republic of Congo (Brazzaville). Thisincludes a 25 percent interest in the Kouakouala A production permit ("Kouakouala"), a 14 percent interest in the La Noumbi exploration licence ("LaNoumbi") and a 30 percent interest in the Mengo field on the Kouakouala Bdevelopment permit ("Mengo"). All the licences are located close to or adjacentto the M'Boundi Field (1.4 billion barrel stock tank oil originally in place ("STOIIP")), which currently produces over 65,000 barrels of oil per day ("bopd"). The consideration for the acquisition is US$28 million in cash and 1,500,000Afren warrants, with a term of five years and an exercise price of £0.60 pershare and an additional 500,000 warrants in Afren, with a term of five years andan exercise price of £0.80 per share, the issuance of which will be contingentupon the satisfaction of certain conditions. The acquisition is expected to close later this year, subject to certainconditions precedent, including customary governmental approvals and the waiverof pre-emption rights by its partners which the Company expects will be met. This follows the recent announcement of a significant agreement in Nigeria forthe development of the Okoro and Setu fields; two proved undeveloped offshorefields of 30 to 60 million barrels, which will be the focus of an intensivedevelopment programme alongside the Ogedeh development, together generatingcombined production of between 15,000 to 20,000 bopd by 2008. Afren intends to further expand its presence in the Congo in the near term andto continue to diversify into other proven African hydrocarbon provinces, aspart of its objective to become the leading pan African independent Explorationand Production Company. Afren's strategic entry into the Congo follows a recentvisit by a senior Afren team led by Dr Rilwanu Lukman with the President of theRepublic of Congo. A location map of the assets can be viewed on the company's website:www.afren.com. Kouakouala Field The Kouakouala field was discovered by Elf in 1993 and brought on stream in May2000 by the current operator Maurel et Prom, who has a 50 percent stake. TacomaResources, a subsidiary of Burren Energy, holds the remaining 25 percent stake. Kouakouala provides Afren immediate revenue with gross average field productionof 1,093 bopd in the first quarter of 2006 from four producing wells. Thepartners in the field are discussing options to prolong field life and increaseproduction and reserves, including the implementation of a water injectionprogramme and the drilling of additional production wells. La Noumbi The La Noumbi licence consists of 2,830 sq km of under-explored acreage and liesdirectly to the south of the Gabon border and to the north of the Kouiloupermit, which contains the prolific M'Boundi field. The licence is operated byMaurel et Prom, who have a 49 percent stake, with Burren Energy holding a 37percent stake through Tacoma Resources; Afren is acquiring the remaining 14percent interest. The La Noumbi Production Sharing Contract was ratified by theCongolese parliament on 24 March 2006. This licence offers an exciting high impact exploration opportunity. Severalstructural leads have been identified, the most mature of which is Doungou.Doungou is on trend with and interpreted to be in a similar structural settingto M'Boundi and has potential reserves of 50-75 mmbbl. A number of othersignificant leads and prospects have been identified on the licence. The forward programme will involve carrying out further seismic acquisition andthe reprocessing of existing data. This will be followed by the drilling of themost attractive targets, with three firm and three contingent wells requiredunder the terms of the Production Sharing Contract. Preparations are underwayfor the drilling of the first exploration well on the Doungou prospect laterthis year. A number of oil export options are being examined including a tie-back to theM'Boundi field and the possibility of a pipeline to the coast, where offloadingto an FPSO could occur. Mengo Field The Mengo field was discovered by Elf in 1979 and has in place volumes of 2billion barrels of oil. The field was shut in by Elf in 1993 followingdisappointing production rates, mostly from vertical wells. Afren intends towork with the Mengo partners (Maurel et Prom and Burren) to bring the latesttechnology to the field, including high angle wells and fracture stimulationtechniques and will look carefully at potential future improved drilling andoperational management processes for Mengo. Future production from Mengo will besubject to a 15 percent overriding royalty to Heritage Oil Corporation. Enquiries: Afren +44 20 7182 1800Brian O'Cathain boc@afren.comOsman Shahenshah os@afren.com Pelham Public Relations +44 020 7743 6673James Henderson james.henderson@pelhampr.comAlisdair Haythornthwaite alisdair.haythornthwaite@pelhampr.com Background information Afren Afren (www.afren.com) was founded in December 2004 by a management teamincluding Dr Rilwanu Lukman with the vision to become the leading pan Africanindependent Exploration and Production company. Since its listing on the AIMmarket of the London Stock Exchange, Afren has rapidly expanded its portfolioand the management team has delivered ten assets in the Joint Development Zoneof Nigeria Sao Tome and Principe, Nigeria, Gabon and Congo. Afren will continue to add to its diversified portfolio of production, near termdevelopment and high impact exploration with the overall objective of creatingsubstantial shareholder value. Heritage Oil Corporation Heritage is an international oil and gas corporation with a development propertyin Russia, producing property in the Sultanate of Oman and exploration projectsin the Republic of Uganda. Heritage Middle East, which is focusing on Iraq, hasestablished an office in Amman, Jordan. The Company's Common Shares trade on theToronto Stock Exchange under the symbol HOC. This information is provided by RNS The company news service from the London Stock Exchange