Wentworth Resources, an independent natural gas production company focused on Tanzania, has concluded an agreement with Scirocco Energy plc ("Scirocco") to purchase its 25% non-operated working interest in the Ruvuma Production Sharing Agreement ("Ruvuma Asset") in Tanzania (the "Transaction").
The 1.9 Tscf (mean GIIP) Ntorya gas discovery located within Ruvuma, Tanzania is operated by ARA Petroleum Tanzania (50% working interest, Aminex plc 25%) and is adjacent to Wentworth's Mnazi Bay gas producing asset.
The consideration is comprised of an initial cash payment of $3 million due upon Completion, with further deferred and contingent cash payments of up to $13 million dependent on certain development and production milestones.
The consideration will be funded through Wentworth's cash resources whilst allowing the Company to maintain its commitment to a long-term, sustainable and progressive dividend for shareholders.
Katherine Roe , Chief Executive of Wentworth:
"This is a transformational transaction for Wentworth establishing us as a dual-asset, full-cycle E&P with a significantly enhanced resource base and production profile. The deal represents an attractively priced, low risk entry into a high growth opportunity which cements our position as a leading supplier of domestic gas to Tanzania .
"This compelling growth opportunity is fully aligned with our commitment to support the Government to reach its goal of providing universal energy access by 2030 in accordance with our purpose to empower people with energy and deliver value for Tanzania , Wentworth and all our stakeholders."
· Value accretive transaction represents an attractively priced, low risk entry into a high growth opportunity with the majority of the consideration only payable upon meeting development and production milestones
· The Ruvuma development is expected to deliver a transformational increase in Wentworth's production and resources alongside Mnazi Bay enabling Wentworth to support both the growing energy needs and industrialisation of Tanzania
· Progresses Wentworth's stated strategy of increasing scale and driving growth through a focus on natural gas projects in Tanzania
o Positions Wentworth as the leading domestic gas player in Tanzania with a diversified production, appraisal and development portfolio
o Ruvuma will become the third producer of domestic gas in Tanzania alongside Mnazi Bay (Wentworth 32% working interest) and Songo Songo
o Enables Wentworth to continue to support the Government of Tanzania's ambition to increase energy access through lower- carbon solutions and reach universal energy access by 2030
· Underscores Wentworth's position as a key partner for the Government of Tanzania
· Transforms Wentworth into a multi-asset domestic gas producer in Tanzania and represents a first step into asset diversification and towards a full-cycle portfolio
· Wentworth's in-country expertise and track record of delivery will support the Ruvuma JV to maximise the potential of a world class asset
· Wentworth remains committed to offset all existing Scope 1 and 2 emissions and partially offset Scope 3 emissions in 2022 and will work with the Ruvuma JV partners to ensure the development of the project is aligned with these aspirations to enable the Company to continue to have one of the lowest carbon intensities per boe in the UK plc market
The Ruvuma Asset
The Ruvuma asset contains the Ntorya-1 discovery well, drilled in 2012, and the Ntorya-2 appraisal well, drilled in 2017, and is estimated by RPS (2018) to have a mean estimated GIIP of c.1.9 Tscf. The Ntorya-1 gas discovery well is located approximately 30 km from the Madimba gas plant which is within the Mnazi Bay concession.
Development activity is progressing with a 338 km2 3D seismic survey currently underway before the drilling of the Chikumbi-1 appraisal well in late 2022 or early 2023. The Chikumbi-1 well aims to confirm 2C resources of 763 Bscf. The cost of the seismic survey and appraisal well net to Wentworth is estimated at $6.25 million .
Final Investment Decision ("FID") is targeted for 2023 with first gas expected in late 2024 and an ultimate target production rate of up to 140 MMscf/d. The project will require construction of a pipeline from the gas field to the government operated Madimba gas facility, located approximately 30 km eastward, which is capable of handling 210 MMscf/d and is currently receiving most of the production volumes from the Mnazi Bay gas field. Gas from the Madimba gas facility will then be distributed via existing gas infrastructure to end users.
A commercialisation study performed by io oil and gas consultancy (a Joint venture between Baker Hughes and McDermott) in 2017 showed that a 140 MMscf/d Full Field development project would require approximately $143 million (gross) of capital expenditures. Actual costs and project scope will be dependent on a development plan agreed to by the Ruvuma JV partners and the government.
Details of the Transaction
The economic date of the Transaction is 1 January 2022 .
The consideration structure ensures that the majority is only paid in a success case. The headline consideration of up to $16 million is payable in cash. Initial consideration of $3.0 million is payable in cash payable upon completion of the Proposed Transaction. Upon satisfaction of certain conditions Wentworth will make a loan of $0.5 million available to Scirocco (the "Initial Loan"). 50% of such Initial Loan is repayable in the event completion does not take place.
Deferred and contingent payments represent the remaining cash payment of $13 million which is due upon the following key milestones:
o $3.0 million on reaching FID;
o Up to $8 million through a minority share of net profit to Wentworth; and
o $2.0 million on reaching gross cumulative production of 50 Bscf.
Wentworth has agreed to a loan arrangement of up to $6.25 million with Scirocco (the "Facility") to enable Scirocco to meet its cash call obligations and provide continuity to the work programme in the interim period to Completion. Any drawdowns under the Facility are subject to Scirocco shareholders' approval and partner non pre-emption and the full amount of drawdowns (less $0.25 million of the Initial Loan) are repayable in the event of non-completion. The Facility will be secured by assignments of security by Scirocco in favour of Wentworth over the Licence Documents for the Ruvuma Asset. The grant of such security will be subject to the consent of the Minister for Energy in Tanzania and both parties will look to obtain such consent as soon as possible. The first $3.0 million to be drawn under the Facility is interest free, however, any amounts drawn in excess of $3.0 million will incur interest at a rate of 7% per annum until such time as the grant of the security in respect of the Facility is approved by the Minister for Energy in Tanzania .
In line with the requirements of Schedule Four of the AIM Rules, Scirocco recorded its interest in the Ruvuma Asset at a gross asset value of £14.63 million ( $18.0 million ) per its unaudited accounts for the six month period ended 30 June 2021 . For the audited year ended 31 December 2020 , Scirocco incurred losses relating to the Ruvuma Asset of £0.81 million .
Timetable and Conditions
The proposed Acquisition is subject to formal shareholder approval from Scirocco's shareholders at a General Meeting to be held in due course, as well as certain regulatory approvals plus the non-exercise or waiving of pre-emption rights by the other Ruvuma Asset JOA partners.
The Transaction will not result in any changes to the Board of Wentworth . The Company currently expects the Transaction to complete ahead of the Longstop Date of 30 June 2023.