Oil and gas company Byron Energy has entered into an agreement to fund the construction of its production platform at SM58 located in the U.S. Gulf of Mexico.
Byron said on Wednesday it had signed a binding secured promissory note with Crimson Midstream, a portfolio company of The Carlyle Group, to borrow an initial amount of $15 million.
The first tranche of $10 million under promissory note facility has been drawn by the Byron group.
The company said that funds from the promissory note would be used primarily for the ongoing construction of the production platform and pipelines at Byron’s wholly owned SM 58 field, following the substantial hydrocarbon accumulation discovered by the drilling of SM58 G1 well (formerly SM58 011 well).
The funds can also be used for completion of SM58 G1 well and specified activity on the Byron-operated SM71 project.
Key terms of the promissory note include the amount of $15 million, a senior secured debt over the company’s SM71 & SM58 assets and guaranteed by the company, and an interest rate of 15% p.a., over a 3-year term, with a first-year interest-only arrangement and no transaction fees.
The note also includes principal and interest payable via a fee on production under the Promissory Note, based on monthly throughput of Byron’s oil production.
An oil hedging program on approximately 50% of Byron’s net SM71 existing proved producing forecast production, with the first of a multi staged hedge in place on 300 barrels (bbls) of oil per day (net to Byron) over the three-year term of the loan beginning 1Q/2020 implemented through a hedging counterparty, at a preferred customer rate, at fixed price of $52.20 per bbl net of hedge costs, plus the WTI/LLS Differential, plus or minus applicable quality and transportation adjustments.
A dedication and transportation services agreement which provides for a rate significantly lower than that paid by “uncommitted” shippers and production sourced from any of Byron’s seven SM 73 field area blocks will receive the same discounted rate.
Crimson Midstream is a provider of crude oil transportation and storage services in California, Louisiana and offshore Gulf of Mexico. Crimson safely and reliably operates more than 2,000 miles of pipeline transporting approximately 400,000 barrels of crude oil per day to end-users.
Maynard Smith, Byron’s CEO, said: “The funds from the issue of this promissory note combined with our recent equity raising will enable Byron to accelerate development of our exciting SM58 project. The initial $15 million borrowing from Crimson can be potentially expanded substantially, based on production performance. This is the start of what I am sure will be a long and mutually rewarding relationship with Crimson.”
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