Columbus Energy Resources PLC (LON:CERP) has signed a sale and purchase agreement to buy out Touchstone Exploration Inc’s (LON:TXP) 50% stake in their Icacos field joint venture project in the South West Peninsula of Trinidad.
AIM-quoted Columbus currently owns the other 50% of the project and reached a deal in principle to buy Touchstone’s holding for US$500,000 back in April.
Under the terms of the SPA, Columbus will not pay any of that fee upfront, instead it will pay the consideration over time until January 1, 2021, with Touchstone receiving the revenue it would have received had it retained its interest.
Currently, Touchstone’s share of production is worth around 11 barrels of oil per day, but should production increase, it would be entitled to 25% of any additional net revenue.
Should those payments not meet the US$500,000 price tag before the deadline, Columbus will pay the balance.
After January 1, 2021, Columbus will be entitled to 100% of all revenue from Icacos.
“We are pleased to have signed a sale and purchase agreement for the purchase of a 50% interest in the Icacos field and we look forward to quickly closing the transaction, further strengthening our position in the SWP, so that we can increase production from Icacos and integrate the acreage into our regional strategy,” said Columbus chief executive Leo Koot.
“We are on track to building a core exploration, appraisal, development and potentially significant production hub in the South West Peninsula of Trinidad.
“In line with our ongoing focus on capital discipline, we are not expecting to pay any upfront payments for the Icacos purchase. The consideration will be deferred and mirror the actual production levels from the Icacos field. All operational activities on Icacos will be funded from existing cash resources.”
‘Deal makes sense for both sides’
“Gross production on the field was consistently around 22bopd during 2017 having peaked at 34bopd in 2011,” noted VSA Capital’s natural resources analyst Oliver O’Donnell.
“The Field consists of six wells with three on production although new work programme activities and workovers have been limited recently.
“We believe that the transaction enables both companies to focus more keenly on their core strategies and provides Columbus with a stronger platform from which to explore and unlock the significant potential value we believe exists in the South West Peninsula.”
Shares were up 1.1% to 4.7p in early afternoon trading.
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