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Columbus Energy upbeat after renegotiation of major deals
Trinidad-focussed oil and gas producer and explorer Columbus Energy updated the market on the Beach Oilfield Limited (BOLT) transaction on Monday, as well as its aspirations for operations and exploration in the South West Peninsula of Trinidad (SWP).
The AIM-traded firm said it has successfully restructured the BOLT transaction, on materially improved terms, and has entered into an agreement for lease with Singh's Cedros Estates to gain long term access to the South West Peninsula for oil and gas operations, including the Bonasse oilfield.
On the renegotiation of the BOLT transaction, Columbus said the existing sale and purchase agreement was terminated in return for consideration including payment of up to $0.45m to BOLT, upon the transfer of the existing lease to Columbus - including the rights to the Bonasse field - and the transfer of associated agreements for oil and gas operations on the SWP.
Columbus would also make a payment to Petrotrin of approximately $0.08m to complete the purchase of a 27.5% interest in the Bonasse field, with Columbus relinquishing its 25% shareholding in BOLT, BOLT relinquishing all rights under the existing lease, Columbus acquiring access to all oil and gas rights on the SWP, and BOLT retaining the loan of approximately$1.1m.
Columbus said it would also pay deferred consideration to BOLT of $0.5m upon the development of any field, other than the Bonasse Field, situated within the existing lease, as well as a royalty of 3% on net production from a development of the SWP licence, also excluding the Bonasse Field.
The royalty would be payable on net production exceeding 10 million barrels of oil, and capped at $1.25m per annum.
Columbus' board noted that, by removing the need for the company to adopt the BOLT loan, the upfront consideration for the BOLT transaction, as payable to BOLT and Petrotrin in the second and third quarters of 2018, had fallen by approximately 60%.
The deferred consideration would only be payable on a material success case in due course.
It said the payments due to BOLT and Petrotrin were fully funded from existing cash resources, and were included in the company's 2018 budget.
At the same time as the renegotiation of the BOLT transaction, Columbus signed an agreement for lease with Singh's Cedros Estates, which the board said ensured that the company had access to 100% of the SWP for oil and gas operations until January 2019.
From February 2019, the agreement would grant Columbus the future lease for a period of 27 years, with the company holding 100% of the rights.
The consideration for the agreement for lease involved Columbus paying Singh Estates TTD 2.5m ($0.38m) in the second quarter of 2018.
Columbus said the payments due to Singh Estates were also fully funded from existing cash resources and were part of its 2018 budget.
The consideration for the grant of the future lease consisted of rental of $0.07m per annum, escalated up or down depending on the prevailing West Texas Intermediate oil price, as well as half-yearly stepped royalty payments of up to 12.5% payable on gross production, capped at $2m per annum.
No royalty payments would be due for first two years of production, with 10% payable between years three and eight, and 12.5% from year nine onwards.
A total of TTD 0.1m would be paid in drilling bonuses upon the spud of each of the first three deep wells, with a development bonus of TTD 0.2m due on approval of a development plan arising from a new discovery.
The previous arrangements with Singh Estates, which included royalty payments of 12.5% from first production, with no cap on annual payments, could have "seriously affected" the commencement of any commercial development of the SWP by the company, Columbus explained.
It said the future lease had a minimum work obligation of three wells or workovers that involved deepening the well, and was otherwise on "industry standard terms and conditions", substantially similar to the existing lease.
"Today's news is a major milestone for Columbus and further delivery of our strategy to build a core exploration, appraisal, development and potentially significant production hub in the South West Peninsula of Trinidad," said Columbus Energy chairman Leo Koot.
"The changes to the overriding royalty rates we have agreed, as well as the timing of their introduction and annual caps on those rates, means that a successful commercial development of the SWP following any exploration [and] appraisal success is now far more likely and will now be undertaken in a manner which works to the benefit of all interested stakeholders.
"Our fully funded 2018 work programme in the SWP includes commencing a well reactivation programme in Q2 2018 on the Bonasse field, alongside undertaking further analysis of the good quality 3D seismic and other data, with the first well potentially being drilled, subject to satisfactory technical analysis, in the first half of 2019."