Investment firm Kistos said Wednesday it had reached a conditional agreement to acquire all of the outstanding shares of Norway-based oil firm Mime Petroleum A.S. from Mime Petroleum S.a.r.l.
Mime holds a 10% interest in the Balder joint venture, comprising the Balder and Ringhorne fields offshore Norway, and a 7.4% stake in the Ringhorne East unit, all operated by Var Energi.
On completion, the acquisition will add 24 MMboe of 2P reserves (operator estimate) plus 30 MMboe of 2C resources, increasing total Kistos reserves plus resources to approximately 80 MMboe.
According to Kistos, the acquisition will also add over 2,000 boe/d of production immediately and help to boost group output to in excess of 15,000 boe/d in 2025 once the Jotun FPSO is on production.
Kistos management estimates enlarged group production in 2023 will be in the range of 8,500 and 10,500boe/d.
The consideration for the transaction
"The consideration for the transaction is US$1 plus the issue of up to 6 million warrants exercisable into new Kistos ordinary shares at a price of 385p each, which represents a premium of 31.4% based on the last trading date prior to this announcement of 293 pence on 18 April 2023. 3.6 million of the warrants can be exercised between completion of the transaction and 18 April 2028. The balance will be exercisable from 1 June 2025 until 18 April 2028," Kisos said.
On 31 March 2023, Mime had cash of US$109MM and it is due to receive a tax refund of US$80 MM in December 2023. At completion, Mime will repay US$75MM of its debt and the enlarged group will assume the remaining US$225MM. A payment to Mime’s bondholders of up to US$45MM in 2025 is contingent on certain operational milestones being achieved.
Based on operator estimates, 2P reserves at Balder and Ringhorne were 23.6 MMboe net to Mime at the end of 2022. In addition, Kistos estimates Mime has net 2C resources of 29.8 MMboe, largely comprised of additional upside in Balder and Ringhorne plus the 2021 King oil discovery. Including Mime, total Group resources will be approximately 80 MMboe.
"Mime’s share of production from Balder and Ringhorne is expected to be over 2,000 boe/d in 2023. This will increase significantly once the Balder X project is onstream, with production for the enlarged Group expected to be over 15,000 boe/d in 2025 once the Jotun FPSO is onstream," Kistos said.
Balder X comprises the Balder Future and Ringhorne Phase IV drilling projects and is designed to extend the life of the Balder Hub. It includes upgrading the Jotun FPSO, which is more than 70% complete and is forecast by the operator to sail away in the first half of 2024.
In a presentation in Ferburary, MIME said it had experienced challenges since project sanctioning, "with capex doubling and first oil postponed by two years since sanctioning in 2019."
Kistos expects Mime’s capital expenditure in 2023 to be up to US$130MM. Tax relief is available on this expenditure at a rate of 78% and is expected to result in a further significant tax refund in December 2024.
"Scope 1 and Scope 2 CO2 emissions from the Balder Hub are expected to fall by more than 50% to approximately 7.5kg per boe once Balder X is onstream. This is well below both the global and the North Sea average," Kistos said.
Commenting on the proposed acquisition, Andrew Austin, Kistos' Executive Chairman, said: "After a period during which commodity price volatility and fiscal uncertainty has made it difficult to agree deals in the UK and the Netherlands, I am very pleased to be able to announce Kistos’ expansion into Norway. Kistos has evaluated several transactions in the UK and Dutch sectors, but the imposition of punitive windfall taxes and a lack of fiscal certainty have meant that both countries remain difficult places to commit capital and ensure continuity of shareholder returns.”
“I expect Mime to be a platform for growth on the NCS and I believe Mime’s management team – whose strategy and goals are aligned with ours – can help us achieve that. Critically, as well as providing us with visibility on a rising production profile over the next few years, principally though it’s oil, the hydrocarbons produced at Balder will also enable us to maintain our industry-leading Scope 1 and Scope 2 CO2 emissions in the medium-term.”