Columbus, the oil and gas producer and explorer focused on onshore Trinidad with the ambition to grow in South America, provides the following update about the Steeldrum transaction.
The Company is pleased to note that the Ministry of Energy and Energy Industries in Trinidad (the Ministry) has granted an extension of the licence for the Cory Moruga Block (the Licence). The Licence will run until 2032. The extension will allow Steeldrum Oil Company Inc (Steeldrum) to commence commercial sales from the Snowcap-1 well as the first step of the Cory Moruga field development.
Steeldrum is in the process of being acquired by Columbus, with completion still expected in Q3/Q4 2018.
Leo Koot, Executive Chairman of Columbus, commented:
"The formal extension of the Cory Moruga licence provides the perfect opportunity for the combined Columbus-Steeldrum group to bring a new field onto production before the end of 2018, using existing infrastructure and available funds. The combined entity will then have six fields on production, providing a more robust production profile and with more options to determine where best to invest our funds to obtain the best "bang for our buck".
The Columbus-Steeldrum management team will continue to focus on "quick-wins" to increase production to be implemented following completion of the transaction."
Background - Cory Moruga License/Snowcap Field Development
T-Rex Resources (Trinidad) Limited ("T-Rex"), a wholly-owned subsidiary of Steeldrum, holds 83.8% of the Licence as operator, with the remaining 16.2% being held by Primera Oil and Gas Limited, a subsidiary of Touchstone Exploration Inc.
In July to August 2010, T-Rex drilled the Snowcap-1 exploration well in the Licence and performed a flow test in February 2011 during which time the well flowed 29.5-degree API light oil at varying rates from 1,100-1,450 bopd and gas at a rate of 2.2 MMCFG with final flowing pressure of 1,180 psi. Two subsequent extended production tests later produced at sustained rates of approximately 250 bopd on 7 -12/32" choke size (in 2012) and at 80 bopd oil (in 2015) with an emulsion mix due to possible water influx from a deeper sand. It is expected that the well will resume to flow and produce at a fluid-rate of around 100 BFPD with the extent of the water-cut from the well being unknown at present given that it is over three years since the well last flowed. When natural flowing pressure decreases, artificial lift can be used to increase production during this appraisal phase of the field.
T-Rex declared a discovery in August 2015 which was noted as a Commercial Discovery by the Ministry in February 2016. The Ministry has confirmed that the expiry date for the Licence had been formally extended until 28 August 2032, allowing T-Rex to proceed with a phased development of the Snowcap Field, the first step being commercial sales from the Snowcap-1 well using existing infrastructure. Production will commence as soon as possible after completion of the acquisition by Columbus of Steeldrum.
Further field facilities and development wells will be added on a phased basis in subsequent years based on initial production performance.
Columbus is also considering other drilling opportunities on the Cory Moruga Licence and also at South Erin and Innis-Trinity, all to be funded from currently available resources. Further updates will be announced in due course.
Background to Steeldrum Acquisition
On 13 July 2018, Columbus signed a Sale and Purchase Agreement ("SPA") to acquire Steeldrum Oil Company Inc ("Steeldrum"), which will add approximately 200-250 bopd and reserves of 5.6 mmbbl from the Innis-Trinity field and South Erin field combined. The transaction also includes the Snowcap Field/Cory Moruga development project, expected to add recoverable reserves of approximately 1.1 mmbbl to the Columbus portfolio.
Upon completion of the Steeldrum acquisition, the Company expects to issue 109,166,209 shares to the sellers of Steeldrum. This consists of 92,743,775 shares (the "Base Consideration Shares") and 16,422,434 shares for the Licence extension.
As at the date hereof, the Company's issued share capital consists of 650,286,412 ordinary shares with a nominal value of 0.05p each will increase as follows after the acquisition:
Current shares in issue: 650,286,412
Base Consideration Shares: 92,743,775
Cory Moruga Shares: 16,422,434
Total Shares which will be in issue: 759,452,621
Steeldrum's shareholders will hold 14.4% of Columbus' stock after the acquisition. The Company has already confirmed that Steeldrum shareholders will be subject to certain lock-in arrangements that will prohibit them divesting of their shares for a period of at least 6 months post completion, save for 10% of the Base Consideration Shares. That said, Columbus is in regular dialogue with Steeldrum's major shareholders who have confirmed they intend to support Columbus as medium-long term investors.