Gulfsands Petroleum plc, the oil and gas production, exploration and development company with activities in Syria, Tunisia and the U.S.A., is pleased to announce that the Company has reached an agreement with the Caithness Petroleum Limited group (Caithness) to acquire Cabre Maroc Limited (Cabre Maroc), a wholly owned subsidiary and operator of an extensive portfolio of highly prospective oil and gas exploration licences and gas exploitation concessions covering an area of 13,352 square kilometres (km2) in northern Morocco.
The total consideration for these transactions will result in cash payments totaling approximately US$19 million by way of purchase consideration, the provision of up to $11.5 million of financial guarantees for the performance of future exploration commitments made to ONHYM, the regulator of Morocco's oil and gas sector (to be refunded immediately upon fulfillment of those commitments), and up to US$11 million in funding a portion of Caithness's pro rata share of the cost of exploration activities on two of the permit areas in which Caithness has retained minority participating interests.
The purchase of Cabre Maroc delivers to Gulfsands a large, contiguous and highly prospective acreage position in an area with proven petroleum systems, revenues from near term production, and multiple drilling targets. The Company believes that there is meaningful near term value potential contained within the proven conventional and shallow depth gas play in the Rharb Centre permit, together with significant exploration upside related to the fold and thrust belt structures identified in the adjacent Rharb Sud, Fes and Taounate permits.
Completion of the acquisition of Cabre Maroc is anticipated for mid January 2013 following approval of the transaction by Caithness's shareholders. The transaction is however not subject to regulatory approval.
Following Completion of the acquisition and various post Completion matters, Gulfsands and Caithness Petroleum through their respective wholly owned subsidiaries will become co-venturers with ONHYM in respect of the Fes and Taounate Permits, with Gulfsands the operator of both exploration joint ventures.
Commenting on this announcement, Ric Malcolm, Gulfsands CEO, stated:
'Gulfsands has carefully assessed numerous opportunities to diversify its business and we are delighted that our much preferred opportunity, the acquisition of Cabre Maroc, has been concluded. We believe this acquisition represents a tremendous opportunity to develop a substantial business in Morocco, with potential near term cash flow and exciting exploration upside and in a country well recognized for its stability and attractive fiscal terms. These fiscal terms ensure that the discovery of even a relatively modest volume of recoverable oil or gas on either of the Fes and Taounate Permits would deliver very significant value to our shareholders.
I am therefore especially pleased that we will be able to work with Caithness in taking forward the Fes and Taounate projects so that we can access their considerable experience of working in Morocco and the geologic models they have begun to develop for these highly prospective permits.
With this acquisition and the recently announced move to assume operatorship and increase our interests in Tunisia, we are making great progress towards achieving our ambition of providing the Company with the opportunity of creating substantial shareholder value through operations and exploration success in additional countries of the MENA region.'