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Ophir Energy Plc (OPHR)

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Thursday 03 May, 2018

Ophir Energy Plc

Proposed Acquisition

RNS Number : 9618M
Ophir Energy Plc
03 May 2018

3 May 2018


Ophir Energy plc

("Ophir" or the "Company")


Proposed Acquisition of a package of Southeast Asian assets from Santos


Ophir has agreed to acquire a package of Southeast Asian assets from Santos Limited, an Australian listed Oil & Gas company, for an aggregate cash consideration of $205 million pre-working capital adjustments, subject to certain approvals (the "Transaction"). The portfolio of assets includes material producing assets in Vietnam and Indonesia plus exploration and appraisal assets in Malaysia, Vietnam and Bangladesh.


The Transaction is in line with Ophir's stated strategy of rebalancing its portfolio towards a larger production and cash flow base to enable us to sustainably support the refocused exploration portfolio and to consider returning capital to shareholders. This rebalancing will also facilitate further economies of scale in operating expenditures, general and administration expenses ("G&A") and will provide greater capital allocation and financing efficiencies.


The Company intends to fund the consideration through its existing financial resources and a new acquisition bridge facility, which it intends to replace in due course with an increase in the Company's existing Reserve Based Lending ("RBL") facility.


Key Highlights


·      A balanced and complementary portfolio of Southeast Asian assets with low operating costs, strong cashflows, near term development opportunities and exploration potential


·      Resilient production in Vietnam and Indonesia, providing low risk cashflow

Proforma 2018 forecast working interest production from Santos assets of ~13,500 boepd

Proforma Group 2018 production increases to ~25,000 boepd

Proforma Group 2018 forecast funds flow from production doubles to ~$180 million


·      Production life extensions utilising strategic infrastructure positions


·      2P reserves increase of over 40% from 49.4 MMboe to 70.6 MMboe


·      Upside optionality provided by the diverse portfolio of development, appraisal and exploration opportunities in Vietnam, Indonesia, and Bangladesh


·      Expected to bring forward Ophir's stated objective of being free cash flow positive, and therefore its ability to consider returning capital to shareholders


·      Material cost synergies - estimated to be in excess of $13 million per annum


·      Transaction expected to payback within three years at current commodity prices


·      Transaction to be financed through existing financial resources and a new 18-month acquisition bridge facility of up to $130 million (for which term sheets have been agreed). The bridge facility will be subsequently refinanced into the Company's existing RBL facility



Nick Cooper, Chief Executive Officer, commented:

"It is a declared strategic objective of Ophir to rebalance its asset base and become free cash flow positive in order to consider regularly returning capital to shareholders. This transaction accelerates the realisation of this goal.


Ophir has maintained a strong balance sheet through the down cycle in order to benefit from such accretive opportunities that fit our established expertise. The acquired assets also offer an attractive combination of operational upside and material cost synergies with our existing Southeast Asian production base".


Current Trading Update


Current operations are performing in line with the guidance provided at the full year results in March 2018. The Company's existing production is expected to average 11,500 boepd in 2018 and generate net funds from production of $90 million.


Ophir continues to work to progress the project financing for the Fortuna project as outlined at the time of the full year results.



A conference call for investors and analysts will be held at 8.00am this morning.


Dial in: 0800 358 6377 or +44 (0)330 336 9105, code: 1866581

Replay available for five days: +44 (0) 207 660 0134, Code: 1866581



This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulations (EU) No. 596/2014 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR.


For further enquiries, please contact:


Ophir Energy plc

Geoff Callow, Head of IR and Corporate Communications   + 44 (0) 20 7811 2400


Brunswick (PR Adviser to Ophir)

Patrick Handley                                                                         + 44 (0) 20 7404 5959

Wendel Verbeek


Barclays - Lead Financial Advisor

Will O'Malley                                                                             + 44 (0) 20 7623 2323

Tom Macdonald


Bank of America Merrill Lynch - Joint Financial Advisor

Julian Mylchreest

Tony White                                                                                + 44 (0) 20 7628 1000






Overview of the Transaction


The transaction is being structured as a series of acquisitions and it is anticipated that the closing of the acquisition of the producing assets will be able to occur before the closing of the acquisition of the exploration assets owing to the regulatory and partner approvals that are required.


The acquisitions of the producing assets (Block 12 W PSC in Vietnam and the Madura and Sampang PSCs in Indonesia) are inter-conditional, with closing conditional upon the approval of Ophir's shareholders.


Subject to closing of the acquisition of the producing assets, the acquisitions of the three exploration and appraisal assets (in Vietnam, Malaysia and Bangladesh) are subject to the approval of Ophir's shareholders, regulatory consents, and respective pre-emption regimes. The acquisition of each of these three assets will close upon the satisfaction of the respective conditions relating to such transfer of interests.    


In the event that the acquisition of the producing assets completes, but the acquisition of any or all of the exploration assets do not complete, Ophir has agreed to meet the capital commitments on these exploration licences. There is an aggregate of $35.6 million of capital commitments associated with the exploration assets. The maximum consideration payable in the event that Ophir is unsuccessful in closing all of the three exploration acquisitions, would therefore total $240.6 million (pre-working capital adjustments). The Company has also agreed to pay a $4million deductible deposit.


As noted above, the acquisitions are conditional on, inter alia, the approval of shareholders at a general meeting of the Company. A shareholder circular convening the general meeting and setting out further details on the acquired assets and the rationale for the Transaction will be published and posted to shareholders in due course. The Company will make a further announcement about the timing of the shareholder meeting when it publishes the circular.


This transaction may constitute a reverse takeover as defined by the Listing Rules of the UK Listing Authority.


Overview of the Assets being acquired



A 31.875% working interest in a material producing oil and gas field and material stakes in two exploration blocks

·      Block 12W - Producing asset:

- 45 MMboe of 2P Reserves (gross)

 - ~23,600 boepd (gross) production from Chim Sào/Dua with associated gas


·      Blocks 123 (50% operated interest) / 124 (40% non-operated interest) - Exploration permits in frontier Phu Khanh Basin, with large oil/LNG scale potential



A portfolio of operated producing East Java gas assets supplying a growing market with robust pricing

·      Interests in two Production Sharing Contracts:

Sampang - 45% operated interest

Madura - 67.5% operated interest

·      Gas production from the Oyong, Wortel fields in the Sampang PSC, and the Maleo & Peluang fields in the Madura PSC.

12 MMboe of 2P reserves (gross)

11,500 boepd (gross) production

·      Also includes the Meliwis discovery (77.5% operated interest) which will be developed through the Madura infrastructure

·      Near field exploration and appraisal targets




A 20% non-operated working interest in the Deep Water Block R PSC (offshore Sabah, Malaysia).




A 45% operated interest in exploration Block SS-11, Bangladesh immediately adjacent to multi-Tcf producing fields across the border in Myanmar

·      An early stage exploration project with multiple plays


Financial information related to the assets the subject of the Transaction


As at 31 December 2017, the value of the gross assets, the subject of the Transaction totalled $481 million. The profit before tax attributable to the assets the subject of the Transaction totalled $113 million in 2017.


Rationale for the Transaction


The Transaction is consistent with Ophir's continued rebalancing of its portfolio towards a larger production and cash flow base to sustainably support the refocussed exploration portfolio and to return capital to shareholders.  This rebalancing will also facilitate further economies of scale in operating expenditures, general and administration expenses ("G&A") and will provide greater capital allocation and financing efficiencies.


The assets to be acquired pursuant to the Transaction are also consistent with Ophir's Southeast Asian focused strategy and provide a good combination of strong cashflows with near term growth potential:


·      Significant future oil and gas production underpinned by 21.2 MMboe of remaining 2P reserves (YE 2017) and ~5.0 MMboe of estimated reserve add from the future Meliwis development

·      Discovered resources and high impact exploration provide material opportunities for growth in Bestari

·      Over 40% increase in 2P reserves

·      Proforma 2018 forecast funds flow from production doubles to ~$180 million

·      Bangladesh exploration acreage a continuation of our offshore Myanmar play - offering attractive exploration upside close to Shwee production



Financial effects of the Transaction for Ophir


The Transaction will:

·      Add ~13,500 boepd of net working interest production to Ophir in 2018 and ~21.2 MMboe to Ophir's net working interest reserves

·      Increase proforma 2018 funds from production to $180 million

·      Increase proforma 2018 capital expenditure (excl. acquisition cost) to $175 million

·      Year-end net debt is revised to $160 million; year-end liquidity is revised to $260 million

·      In excess of $13 million per annum of G&A synergies (management estimate) post restructuring charges. The previous acquisition of Salamander Energy plc in 2015 demonstrated our ability to extract synergies, with a reduction in G&A costs of 60% over the 3-year period following the acquisition

·      Post transaction leverage remains a conservative <1x Net Debt:EBITDAX ; thereby preserving financial flexibility to deliver the rest of our portfolio's upside, including Fortuna



About Ophir:

Ophir Energy is an independent Upstream oil and gas exploration and production company. It is listed on the London Stock Exchange (LEI: 213800LAZOZTKPAV258).



This announcement is for information purposes only is not intended to and does not constitute a circular or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or any other securities, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor.

Merrill Lynch International ("Bank of America Merrill Lynch"), a subsidiary of Bank of America Corporation, is acting exclusively for Ophir in connection with the acquisition and for no one else and will not be responsible to anyone other than Ophir for providing the protections afforded to its clients or for providing advice in relation to the acquisition.

Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for Ophir and no one else in connection with the Transaction and will not be responsible to anyone other than Ophir for providing the protections afforded to clients of Barclays nor for providing advice in relation to the Ophir or any other matter referred to in this announcement.

This announcement includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond Ophir's control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Directors or Ophir concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and distribution policy of Ophir and the industry in which it operates.

These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing Ophir. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. Such forward-looking statements contained in this announcement speak only as of the date of this announcement. Ophir expressly disclaims any obligation or undertaking to update the forward-looking statements contained in this announcement to reflect any change in their expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure Guidance and Transparency Rules of the FCA or the Market Abuse Regulation.


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