UKOG to acquire Tellurian’s subsidiary Magellan Petroleum

LONDON: UK Oil & Gas (UKOG) has signed a binding heads of terms with Tellurian Investments LLC to acquire the entire share capital of its subsidiary Magellan Petroleum (UK) Investment Holdings Limited for a total consideration of £12 million in cash and shares, a release issued to London Stock Exchange (LSE) noted.

Magellan holds a 35% direct interest in the Horse Hill oil field and surrounding highly prospective PEDL137 and PEDL246 licences, UKOG’s flagship asset.

Upon completion of a share purchase agreement (SPA), this key acquisition will see UKOG’s Horse Hill net oil sales revenues, net reserves and recoverable resources increase by over 69% from our current 50.635% interest to a material  85.635% net share.

Crucially, the acquisition will also give the Company full control over the forward Horse Hill drilling programme and production schedule, together with sole ownership of the Horse Hill oil field site lease.

As a consequence of this transaction, drilling of the much-anticipated HH-2/2z Portland horizontal well will follow very shortly after completion of the SPA.

This acquisition is in accordance with UKOG’s stated business plan to further consolidate its position in key assets with near term cash generation potential. The acquisition is fully funded primarily by current cash reserves and partly by a convertible loan, which the company has entered into today, but has not yet drawn down.

It should be noted that the cash consideration will not impact UKOG’s ability to fund the forthcoming Horse Hill 2/2z drilling and extended testing campaign, as cash funds for its full 85.635% share were set aside and ringfenced internally in Spring of this year.

The convertible loan detailed below also ensures full funding for UKOG’s increased share of future production facilities costs and other near-term surface, subsurface and regulatory costs necessary to bring the field into long-term production.

Stephen Sanderson, UKOG’s Chief Executive, commented: “This transformational acquisition, the largest in UKOG’s 6 year history as an oil and gas company, boosts UKOG’s net share of its flagship Horse Hill asset by a significant 69% from a 50.635% to an 85.635% net interest, providing the Company with the lion’s share of future production revenues and reserves, together with absolute control over the field’s future development and progress.

Importantly, the acquisition forms a key part of UKOG’s stated near term strategy to grow the company via organic appraisal drilling and by targeted acquisitions in key assets with near term cash flow potential.

The funding of UKOG’s increased 85.635% share of the new HH-2/2z horizontal drilling and testing campaign, scheduled to commence later this year following transaction completion, will not be impacted by this acquisition, as existing cash funds were set aside and ringfenced for this purpose in Spring 2019. The Loan ensures we also remain fully funded for further capital expenditures necessary to get the field into long-term production once necessary regulatory permits are in place this Autumn.

We now look forward to the transaction’s completion and the start of what promises to be an exciting new drilling and testing campaign at Horse Hill, designed to bring the field into long term oil production by year-end.

We thank Tellurian and its subsidiary Magellan for their significant contribution over many years to the success of Horse Hill and wish them good fortune in developing their global LNG business.”

UKOG completes HH-2z horizontal drilling

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