Sirius Petroleum Plc (LON:SRSP) shares strengthened in Tuesday’s early deals after as it struck a deal to acquire an indirect interest in an oil project in Nigeria.
The AIM-quoted company has agreed to acquire 75% of Precision Energy Tetra which has both an equity (40%) and economic (80%) interest in Tetra Petroleum which has a petroleum services contract with the owners of the OML 109 asset.
In turn, Sirius is to fulfil the petroleum services and will play an active role in the operations. Sirius, following cost recovery, will end up with an indirect 30% economic interest in the cash flows of Tetra Petroleum.
There’s only a nominal consideration due for the acquisition, though Sirius has committed to sourcing US$40mln of debt funding from a third-party funder, to cover the costs of the minimum work programme commitment at the Ejulebe field.
It is expected that the funding will be secured directly against the cash flows generated from the work programme.
Ejulebe is located in the North East corner of OML109, in the vicinity of the Ororo field discovery which is in the adjacent block.
Sirius highlighted that Ejulebe hosts some 15 hydrocarbon-bearing horizons, producing oil, associated and non-associated gas (including condensate).
The anticipated work programme will include work-over operations, new side-tracks and new wells in the first stage targeting a production boost up to 5,000 bopd, to be followed by a phase of exploration in the EJ-WSW prospect area.
“The proposed acquisition would be a significant addition to the Sirius portfolio and we look forward to working with the co-owners of the asset and our operational partners to boost production on the Ejulebe field,” said Bobo Kuti, Sirius chief executive.
“We are also excited to explore the EJ-WSW prospect, which, if successful, could potentially add material reserves.”
Sirius shares were up 4.68% changing hands at 0.74p.