Australian Entek Energy Limited has entered into an agreement with Houston-based Peregrine Oil & Gas to sell the company’s entire Gulf of Mexico portfolio for almost $3 million as market conditions continue to take their toll.
Entek will be divesting its 38-percent interest in the GA A133 block and its 25-percent interest in the PN 975 block, as well as its royalty interest in two other blocks, VR 341 and 342.
By way of background, the GA A133 and PN 975 gas developments have now both been shut-in following their natural depletion and are scheduled to be plugged and abandoned (P&A) during the course of this year and next, according to an Entek press release.
As part of this deal, Peregrine, which operates both these blocks, has assumed all of Entek’s P&A obligations in GA A133 and PN 975 including the provision by Peregrine for all bonding requirements which have recently been increased by the relevant US Government authorities. Entek’s share of these bonding and abandonment obligations is estimated to total in excess of US$1 million. In addition, Peregrine has agreed to pay Entek a cash consideration of approximately US$1.86 million.
Accordingly, the value attributed to the VR 341/342 oil and gas royalty stream sold to Peregrine as part of this transaction is approximately US$3 million, the company further said.
Entek Chairman Graham Riley commented: “Our decision to exit the Gulf of Mexico follows a strategic review by your Board in light of the continuous challenging oil and gas price and capital market conditions which, coupled with new onerous bonding requirements for future P&A obligations, has significantly restricted the participation of junior companies like Entek in U.S. offshore producing assets. This transaction eliminates the significant and open ended funding obligations for the abandonment of Entek’s two depleted Gulf of Mexico gas interests and stabilizes the Company’s working capital position to around US$3 million upon receipt of funds expected shortly.”
By Charles Kennedy of Oilprice.com