AIM-listed oil company Hague and London Oil (HALO) has made a deal to buy Tullow Oil’s natural gas producing assets in the Dutch North Sea.
HALO informed on Monday it has agreed the conditional acquisition of non-operated natural gas production assets in the Dutch North Sea from Tullow Netherlands Holding Coöperatief B.A. based on an enterprise value of €4.75 million the net effect of which is that the seller will receive an estimated amount of €9.75 million on completion and contingent payments of up to €20 million payable between January 1, 2019 and January 1, 2021.
HALO’s subsidiary, Hague and London Oil B.V., will acquire the assets through the purchase of the entire issued share capital of Tullow 101 Netherlands B.V. and its two subsidiaries, Tullow Exploration & Production B.V. and Tullow Exploration & Production Netherlands B.V.
Tullow 101, a holding company, was incorporated to undertake the exploration, development and production of oil and gas in the Netherlands. It does not employ personnel and does not perform research and development activities.
Following completion, Tullow 101’s name will be changed to assimilate it within the group.
According to HALO, the proposed acquisition comprises Tullow E&P B.V.’s interests in 12 licences on the Dutch Continental Shelf (DCS) in the Northern Area and a suite of interests in the Joint Development Area in the western part of the DCS. The acreage spreads over 2,878 sq km across 12 licences which generated total net production of 2,900 boepd in 2016.
HALO said that there is significant planned and sanctioned capital expenditures for the acquisition assets, which is in excess of total consideration in both 2017 and 2018. Capex would likely be funded by the operating cashflow generated out of production from the licenses within the current business plans.
The acquisition is part of HALO’s strategy to buy into lower risk, production opportunities in established hydrocarbon provinces with access to, and equity ownership of, infrastructure. The company is currently in discussions with potential finance providers to agree the terms of funding.
Andrew Cochran, Chairman and Interim Chief Executive of HALO, commented: “The prolonged market downturn has hit our sector very hard and has certainly impacted our efforts to diversify and grow the portfolio sooner. We have therefore been focused, disciplined and persistent in our implementation of the announced strategy, and today’s proposed acquisition is the culmination of the company’s dedication to deliver within the stated objectives and a cost-effective manner.”
Cochran added: “These are high-quality, cash generative assets with significant upside potential, in a mature basin with existing infrastructure and commercialization routes – which have been the critical factors in our screening process and are also likely to be key in agreeing the funding of the acquisition.”
Given the scale of the acquisition when compared to the existing group, the acquisition constitutes a reverse takeover under Rule 14 of the AIM Rules and requires the company to issue a new admission document and is conditional, inter alia, on the approval of the acquisition by shareholders.
The company is currently preparing an admission document and readmission to trading with an aim to publish the admission document by August 1. The company is also working on a Competent Person’s Report (CPR) on the material assets and liabilities of the enlarged group.
Following the finalization of the CPR and binding financing agreements, HALO will call for a general meeting at which the approval of HALO’s shareholders to the acquisition will be sought.
Trading in the company’s ordinary shares on AIM has been temporarily suspended since April 4, 2017.
If shareholders approve the acquisition at the general meeting, the company’s existing quotation on AIM will be cancelled and the enlarged group will then be admitted to trading.