Pharos Energy plc, an independent oil and gas exploration and production company has entered into conditional agreements for the farm-out and sale of a 55% working interest and operatorship in each of the Egyptian El Fayum and North Beni Suef Concessions to IPR Lake Qarun Petroleum Co. (IPR Lake Qarun), a wholly owned subsidiary of IPR Energy AG. The consideration implies a gross (100%) value of up to US$115 million for the Assets and consists of US$5 million cash at completion of the Transaction, funding of the Pharos Group’s retained interest share of the cost of future activities on the Assets for US$38.425 million net (subject to working capital and interim period adjustments from the economic effective date of 1 July 2020), and contingent consideration of up to US$20 million dependent on Brent oil prices in each of the 4 calendar years from 2022 to 2025.
Details of the Farm Out Agreements
– Pharos to sell a 55% working interest and operatorship in the producing El Fayum Concession and in the North Beni Suef Concession
– The Transaction implies a gross value of up to US$115 million for the Assets, dependent on the Brent Price contingent consideration
– Firm consideration of US$5 million upon completion of the Transaction
– Disproportionate funding by IPR Lake Qarun of US$38.425 million of costs net to Pharos (to be adjusted for working capital and interim period adjustments from the economic effective date of 1 July 2020)
– Additional contingent consideration of up to US$20 million dependent on the Brent Price from 2022 to the end of 2025 (with floor and cap at US$62 / bbl and c. US$90 / bbl, respectively)
– Expected to strengthen the Pharos Group’s balance sheet and enable a more comprehensive and quicker development of the El Fayum Concession, as well as testing of the low risk North Beni Suef Concession at low cost to Pharos through a sustained drilling programme
– Completion currently expected Q1 2022
“I am extremely pleased to be able to announce the farm-out of a 55% operated interest in each of our Egyptian Concessions, El Fayum and North Beni Suef, to IPR, a group which has extensive experience in Egypt. The farm-out, while instantly boosting our balance sheet, will allow the entry of a partner who has committed to carry Pharos on a capital programme on these Egyptian assets, which will in turn lead to increased production, helping to fulfil the full potential of the concessions.” Ed Story, Chief Executive of Pharos, said
IPR has been present in Egypt for 40 years, currently with 8 concessions and operating 5 (both onshore and offshore) and active in all 4 key producing regions, namely the Western Desert, the Nile Delta, the Gulf of Suez and the Eastern Desert. IPR has proven itself to be both a technically proficient and effective and low-cost operator and has agreed to cap initial operator G&A to around half of current levels, saving ~US$2 million gross per annum. IPR has achieved 90% growth in net production with reserve replacement ratios consistently exceeding 100% year on year since 2012.
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