Gulfsands Petroleum plc will sell the entire interests in Gulfsands Petroleum USA Inc, (“GP USA”), its subsidiary holding the company’s US Gulf of Mexico interests to Hillcrest Resources Limited of Canada.
The transaction expected to close on or before 19th December, 2014. Hillcrest is purchasing all of the Group’s shareholding and loan interests in GP USA and at closing on 19th December, 2014 will pay US$50,000 in cash and assume responsibility for the future funding of GP USA’s activities, continue the employment of all of GP USA’s staff and indemnify the Group in respect of any further responsibility for GP USA, including in respect of GP USA’s lease of the Houston office.
Gulfsands has explained that the sale represents the disposal of the Group’s residual interests in the US Gulf of Mexico and includes transfer of all US based staff and Houston office.
Focus in Syria and Morocco
Commenting on the sale of GP USA, the Company’s CEO, Mahdi Sajjad said: The completion of the sale of GP USA will conclude a process to divest non-core assets that commenced in 2010 and has released a significant amount of cash that has been re-invested in our business since that time.
We are delighted that Hillcrest, which has an experienced management team and is operator of oil and gas interests in Texas has taken on our experienced team of professionals in Houston and will be relocating its activities to our former Houston office from where it will run its wider portfolio of interests which it seeks to expand beyond this acquisition.”
“Our US portfolio of interests have served our Company very well over the years and were an important factor in the Company’s successful listing on the AIM market of the London Stock Exchange in 2005. These assets have produced a significant amount of cash for the Group which enabled the Company to pursue the acquisition, exploration and development of our valuable interests in Syria, but are now no longer considered central to our plans to focus on exploring and developing our portfolio of interests in Morocco and Tunisia until such time as circumstances permit a return to operations in Syria.
“On behalf of the Board I wish to thank our team in Houston, most of whom have been with the Group for many years, for their tremendous dedication to the task of managing our assets in the US Gulf of Mexico which we began acquiring in 2001. Their assistance with this sale process has been invaluable and handled with great professionalism for which we are most grateful.”
During 2013, these non-operated working interests produced, on average, approximately 175 net barrels of oil equivalent per day (“BOEPD”) and at 31 December 2013, remaining working interest proven and probable reserves represented approximately 1.4 million barrels of oil equivalent. The interests held by GP USA consist of six non-operated producing assets and five non-producing assets and as of the end of 2013 had a carrying value of approximately US$2.4 million in the Group’s financial statements.
During 2013, GP USA’s loss for the year was approximately US$1.6 million and is estimated for the ten month period to the end of October, 2014 to have been approximately US$1.5 million. During this ten month period, the Group has provided GP USA with funding of approximately US$2.5 million, largely to facilitate cash flow timing issues associated with GP USA’s decommissioning and well work-over activities on its portfolio of non-operated interests.
The Group has estimated GP USA’s 2015 decommissioning expenditures at approximately US$2.4 million and the net present value of decommissioning expenditures over the life of the entire portfolio at approximately US$12.0 million. These are anticipated to be funded by a combination of GP USA retaining restricted cash deposits of approximately US$2.8 million, Hillcrest’s own financial resources and the setting aside of GP USA revenues.
The company has said that the transaction is anticipated to relieve Gulfsands of potentially significant and unpredictable future financing requirements to support GP USA’s activities in the US Gulf of Mexico, while Hillcrest, an operator of oil and gas interests in Texas, intends to apply its financial and technical resources to expanding GP USA’s net production by investing in drilling additional production wells and well work-overs on GP USA’s portfolio where the opportunity exists.