21 June 2012
Sirius Petroleum plc
("Sirius" or "the Company")
Update on Recent Developments
Sirius Petroleum (AIM:SRSP), the investing company focussed on oil and gas exploration and development opportunities in Nigeria, is pleased to provide an update to shareholders on recent developments including:
· Pre-farm-in agreement entered into relating to an economic interest in a Nigerian Oil Block with prospective resources, estimated by a third party to be in excess of 1 billion barrels with additional unitisation interests;
· Confidentiality and exclusivity agreement entered into with regards to an economic interest in a second Nigerian Oil Block;
· Progress on marginal field opportunities;
· Continued access to a committed facility with CapInvest to provide or procure at least US$ 80 million of debt funding.
Update on Recent Developments
Sirius has entered into a pre-farm-in agreement in respect of an Oil Block (the "Block") located in the offshore Niger Delta Basin (the "Agreement"). Existing 2D seismic and an existing third party expert report indicates in excess of 1 billion barrels of prospective resources in the Block. In accordance with the terms of the Agreement, which at this stage is subject to a confidentiality clause with the farmor, Sirius has been granted exclusivity during which it will engage an appropriately qualified, independent expert to complete a Competent Person's Report ("CPR") to further assess the prospective resource, which will form an important element of the Company's decision-making process with regard to entering into a binding farm-in agreement, a decision which is at the Company's sole discretion.
Summary of the Block
· Located offshore Nigeria, in shallow waters with depths between 50-100m and within a highly prospective zone. This is an area associated with maximum deltaic progradation and sedimentation, evident in the maximum seaward growth of the delta within this region.
· Seismic data show the Block to be dissected by several synthetic and antithetic faults, some of which are associated with structural closures that could be potential prospects for hydrocarbon accumulations.
In accordance with the terms of the pre-farm-in agreement, on entering into the binding farm-in agreement, Sirius will be entitled to a minimum 25 per cent. economic interest in the Block. Sirius will provide 50 per cent. of the funds required to finance an Initial Work Programme (the "IWP"), with the partners contributing the balance of funding. There is a preferential cash flow to Sirius and the other funding partner of 80 per cent. to recover this cost, with the balance to be shared according to each party's economic interest. The IWP will consist of shooting further 2D and 3D seismic to identify drillable prospects in the Block.
In consideration of entering into the farm-in agreement, Sirius will be required to pay a total farm-in fee of US$9m, of which an initial amount of US$3.5m is payable on signing the farm-in agreement, in aggregate to its partners in the Block, the balance of which will be due based on to-be-agreed payments on future milestone achievements in the development of the Block. A Signature Bonus of US$6.25m will be payable to the Department for Petroleum Resources (the "DPR"), on signing the farm-in agreement.
Furthermore, upon acquiring an interest in the Block, Sirius will be entitled to a 20 per cent. interest in the unitisation of a producing Field (the "Field"), the structure of which intrudes into the Block.
Sirius does not intend to make any significant capital expenditure in the Block, excluding farm-in fees, until it has realised revenue from the unitisation of the Field.
In accordance with the terms of the pre-farm-in agreement, Sirius will have a 20 per cent. economic interest in the Block's as-yet-undetermined share of the Field.
· The bulk of the Field is located within a neighbouring oil block, approximately 30-40 km offshore in water depth ranging from 55m to 70m.
· It has been in production for over 20 years, with an average daily production of 10,000 barrels of oil per day ("bopd") and a cumulative production of circa 100 million barrels ("mmbbls").
· Unitisation will entitle Sirius to an equity share of future production from the Field and a letter confirming the requirement for unitisation of the Field has been received by the Operator from the Department of Petroleum Resources.
The precise share of the unitised revenues from the Field received by Sirius and its partners will depend on the precise volume of the Field deemed to be present in the Block.
Proposed Second Block
Sirius is also pleased to announce that it has signed a confidentiality and exclusivity agreement to assess whether to acquire an interest in a second Oil Block located in the shallow waters of the Niger Delta Basin on Nigeria's continental shelf (the "Second Oil Block"). This asset exhibits a number of compelling characteristics, including existing wells which have exciting appraisal and exploration potential. Further announcements will be made in due course with regard to the Second Oil Block.
The completion of a farm-in to the Block and the Second Oil Block will be subject to, inter alia, the receipt of certain partner and governmental approvals.
Ororo Field Update
Sirius' technical team continues to evaluate the 3D seismic data and assess the optimum field development and recovery plan for the Ororo Field. Further progress on this asset remains subject to the completion of that work and the subsequent completion of the Competent Person's Report which is being compiled by Gaffney Cline & Associates.
In addition, the Company continues to review potential marginal field opportunities currently held by oil majors and is confident that it will benefit from involvement in the Marginal Field bid round through its links with Joint Venture partnerships, as previously announced by the Company.
Commenting, Ed Johnson, CEO of Sirius Petroleum, said: "We are very encouraged by our business development activities which have accelerated our initial goals for the Company as evidenced by the new and larger potential assets that are now available to the Company. These present significant opportunities alongside the core strategy to acquire marginal fields, which we actively continue to pursue. The opportunities currently under negotiation will, if we elect to conclude the farm-in agreements, represent a step change for Sirius. We are also eagerly anticipating the upcoming results of the Marginal Field Round, which is currently occurring, as referenced recently by the Minster of Petroleum Resources. Taken as a whole, these opportunities would allow us to develop a balanced portfolio of producing, appraisal and exploration assets in an accelerated timeframe."
Sirius Petroleum Plc
Ed Johnson, CEO / Jamie Bligh, IR
+44 (0) 20 7747 5100
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James Harris / James Spinney
+44 (0) 20 7409 3494
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John Bick / Justine James
+44 (0) 20 7193 7463
+44 (0) 7872 061 007