Azonto Petroleum is selling its entire shareholding in Vioco Petroleum and certain wellhead drilling equipment in Côte d’Ivoire to Vitol E&P.
Azonto holds 35% of the shares in Vioco, which operates and holds an 87% working interest in the CI-202 Block in Côte d’Ivoire, where the Gazelle project is located. Vitol E&P owns the remaining 65% of the shares in Vioco.
Azonto’s interest in CI-202 Block is its main undertaking and under Australian Stock Exchange Listing rules, the shareholders of the company have to approve the sale.
According to Azonto’s press release, the Board is in unanimous agreement that the disposal is in the best interest of all of its shareholders.
Reasons for sale
Azonto explained that it has become increasingly clear to the Board that the combination of challenging conditions in the oil and gas sector currently, including low and volatile oil prices and weak equity market sentiment on the sector, have significantly increased the risk that the company would not be able to secure further funds or agree one or more alternative transactions, before its existing cash resources run out.
Azonto noted that the sale will provide financial stability to the company, as in recent months, the Gazelle project has experienced cost growth, leading to delays, all against the backdrop of a wider sector environment which has become increasingly challenging. Due to these circumstances, the company decided to either secure additional funds to ensure the further development of the company’s interests in CI-202 Block, or enter into a potential sale or merger of the company or a sale of the company’s assets.
Vioco has engaged with the Direction Generale des Hydrocarbures in Cote d’Ivoire to explore a cluster development of Gazelle and adjacent fields, which would require Azonto to fund an exploration well in the next 18 months on the Hippo North prospect, located 7km from Gazelle.
The company said that, based on the information available, including the financial advice from its financial advisors, Evercore, it has decided to sell its stake in Vioco.
“It is intended to enable the company to realise value for its interest in Block CI-202 in excess of its market capitalisation and removes significant financial obligations for which Azonto would be committed in the next 18 months,” Azonto said in the press release.
“The Board believes that the Disposal will allow shareholders to retain value in the company which, post completion will be considering new investment opportunities,” the company added.
In consideration for the sale of the shares in Vioco and the wellhead equipment, Vitol will pay $4,000,000 minus up to $400,000 of certain net liabilities related to the period before Vitol’s acquisition of 65% of Vioco in November 2013.
Furthermore, Azonto is to get $1,100,000 in consideration for the sale of certain wellhead drilling equipment located in Cote d’Ivoire, currently owned by Azonto, subject to Vioco’s commitment to an exploration well, required to retain CI-202 licence, and $2,000,000 upon the occurrence of a commercially viable hydrocarbon discovery in the aforementioned well.