CALGARY, ALBERTA--(Marketwire - Dec. 28, 2012) -
NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR DISSEMINATION IN UNITED STATES
Iona Energy Inc. ("Iona" or the "Company") (TSX VENTURE:INA) is pleased to announce it has entered into a definitive Sale and Purchase Agreement with Carrizo Oil & Gas, Inc. ("Carrizo") to acquire the entire share capital of its wholly owned subsidiary, Carrizo UK Huntington Limited ("Carrizo UK"), including its interest in License P1114 of UK North Sea Block 22/14b including the near-producing Huntington oil field development ("Huntington"). In addition to customary closing conditions and purchase price adjustments, the transaction is subject only to final approval of the United Kingdom's Department of Energy and Climate Change ("DECC"), and is expected to close prior to the end of January 2013.
Included in the Sale and Purchase are:
- A 15% non-operated working interest in the Huntington oil field;
- Royalties equivalent to 2.55% of total gross oil and gas production from the Huntington Joint Venture Partners (the "Royalties");
- A 100% interest in that part of the yet-to-be licensed 27th License Round award covering Block 22/14d that contains the 3D seismically mapped extension of the Jurassic discovery which underlies Huntington; and
- Carrizo UK's ring-fenced tax losses totaling USD$111 million as at the transaction effective date of July 1st, 2012.
Under the terms of the agreement, Iona paid to Carrizo a USD$6 million non-refundable deposit upon signing the Sale and Purchase Agreement, and will additionally pay to Carrizo:
- cash consideration of USD$152 million on closing, including standard financial adjustments, at the transaction effective date of July 1st, 2012; and
- a deferred payment of USD$18 million from first producing field revenues
- normal working capital adjustments from the effective date up to the date of closing
Upon completion of the acquisition of Carrizo's interest in Huntington, the working interests on License P1114 will be E.ON Ruhrgas UK E&P (25% Operator), Premier Oil plc (40%), Norwegian Energy Company ASA (20%), and Iona (15%).
Huntington consists of Paleocene reservoir oil, located in Block 22/14b in the Central North Sea. Huntington has been developed with four production and two water-injection wells and will be tied back to Teekay's Floating Production Storage and Offloading ("FPSO") vessel, the Voyageur Spirit. The FPSO arrived at its final location on October 2nd, 2012. Final hook-up of risers, completion and commissioning are now taking place, with first oil expected in the first half of 2013.
Initial stabilized gross production rates are estimated to be 30,000 bbls of oil per day ("bopd") and 27 MMscf of gas per day ("MMscf/d"), or 4,500 bopd and 4.0 MMscf/d, totaling 5,175 boepd net to Iona (not including approximately net 765 bopd and 0.68 MMscf/d attributed to the Royalties). Management believes peak production rates will be considerably governed by the processing capacity of the FPSO, and as a result production decline rates in the first 24 months are expected to be slight. Given the API of 43 degrees and other qualities of the Huntington crude oil, Iona anticipates a slight premium to Brent quality priced crude.
As developed and under current market conditions, Iona estimates reserves for its interest in Huntington to be, 3.5 MMbbls Proved Reserves, 6.0 MMbbls Proved plus Probable Reserves, and 7.3 MMbbls Proved plus Probable plus Possible Reserves respectively (excluding volumes attributed to the Royalties from the Huntington Joint Venture Partners)1. Iona expects to include the working and royalty interests in Huntington to its 2012 year-end independent reserves evaluation due to be completed no later than April 30th, 2013.
Carrizo has also agreed to assign its 100% interest in that part of Block 22/14d containing a 3D seismically mapped extension of the Jurassic discovery underlying the Huntington field. This agreement is subject to confirmation of the award of Block 22/14d to Carrizo in the UK's 27th License Round and to DECC approval of this assignment to Iona.
Iona's existing cash, a $60 million bridge financing with a Canadian institutional investor, and a senior secured reserves based lending facility ("RBL") with a group of lenders for up to USD$200 million will provide financing for this acquisition. The Company has agreed to terms with a group of RBL lenders and is subject to, amongst other things, continued due diligence, credit or investment committee approvals, definitive documentation and final agreements expects to close both financings on or before January 31, 2013.
Iona's Chief Executive Officer, Neill Carson commented, "We are delighted with the acquisition within our target metrics of meaningful near-term production at Huntington. We believe this transaction is an enabler that will ultimately deliver the booked pre-tax value of USD$1.2 billion in Iona's other 38 million barrels of oil equivalent 2P reserves2. I would also like to acknowledge the effort of our entire team in getting this agreement executed."
Brad Gunn, Iona's Chief Financial Officer, noted, "This deal clearly represents a strategic cornerstone for Iona Energy and we expect this acquisition will unlock our USD$200 million credit facility and provide significant 2013 and 2014 cash flow. By utilizing Carrizo UK's and Iona's tax losses, the majority of future Huntington cash flows are expected to surpass our obligations and fully fund our development aspirations at Orlando and Kells."
Additional information relating to the Company is available on SEDAR at www.sedar.com.
|(1)||Prepared by a non-independent qualified reserves evaluator.|
|(2)||Based on: (a) Orlando reserves and net present value information prepared by Gaffney, Cline & Associates Ltd. ("GCA") (using forecast prices and costs) as of September 30, 2012; (b) Trent & Tyne reserves and net present value information prepared by GCA (using forecast prices and costs) as of December 31, 2011; (c) Kells reserves and net present value information prepared by GCA (using forecast prices and costs) as of March 31, 2012, and (d) West Wick reserves and net present value information prepared by GCA (using forecast Prices and costs) as of December 31, 2011.|
About Iona Energy:
Iona Energy Inc. and its wholly owned subsidiary Iona Energy Company (UK) Limited (collectively, "Iona" or the "Company"), is an oil and gas exploration, development and production company focused on oil and gas development and exploration in the United Kingdom's North Sea.
Forward-looking statements and Cautionary Notes
Some of the statements in this announcement are forward-looking, including statements estimates of the quantities of proved reserves, probable reserves, and possible reserves, as well as estimates of the net present value of future net revenue of proved reserves, probable reserves, and possible reserves. Forward-looking statements include statements regarding the intent, belief and current expectations of Iona Energy Inc. or its officers with respect to various matters, including estimated production, reserves, the RBL and the Bridge, or otherwise. When used in this announcement, the words "expects," "believes," "anticipate," "plans," "may," "will," "should", "scheduled", "targeted", "estimated" and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, are based on various assumptions by Iona's management and are subject to risks and uncertainties that could cause actual outcome to differ materially from those suggested by any such statements. These forward-looking statements speak only as of the date of this announcement. Iona Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws.
Notes Regarding Oil and Gas Disclosure
As used in this press release, "boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
It should not be assumed that the present worth of estimated future net revenue represents the fair market value of the reserves disclosed in this press release. The reserve and related revenue estimates set forth in this press release are estimates only and the actual reserves and realized revenue may be greater or less than those calculated. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
As used in this press release, "possible reserves" are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
Additionally, this press release uses certain abbreviations as follows:
|Oil and Natural Gas Liquids||Natural Gas|
|bbls||barrels||Bcf||billion cubic foot|
|MMbbls||millions of barrels||MMscf||million standard cubic feet|
|MMboe||million barrels of oil equivalent|