EGYPT – TransGlobe Energy Corporation, oil exploration and production company, has announced it has reached an agreement with the Egyptian General Petroleum Corporation, EGPC, to merge the Company’s three existing Eastern Desert concessions (the West Gharib, West Bakr and North West Gharib concessions) into a new modernized concession agreement.
The Agreement is subject to the usual Egyptian Parliamentary ratification and the satisfaction of other closing conditions. All dollar values are expressed in US dollars unless otherwise stated.
The West Gharib, West Bakr, and North West Gharib concessions, including all existing development leases within these concessions, will be merged into the Merged Concession with a new 15-year development term and a 5-year extension option.
Subject to final ratification, the Company will pay EGPC a signature bonus and an equalization (or modernization) payment in installments. The Company anticipates that the equalization payment and signature bonus will be funded from existing resources and expected improved cash flows.
“After a lengthy and constructive negotiation, I believe we have arrived at an incredible win-win amendment for both TransGlobe and EGPC,” Randy Neely, President and CEO said.
“The efficiencies gained from the consolidation of our Eastern Desert concessions, along with the improved netbacks and extended term, are expected to provide TransGlobe with the fiscal incentive and time to unlock meaningful additional reserves and production through the application of modern technology and optimization of infrastructure.
“This will also allow us to move forward with important ESG initiatives to improve our environmental footprint as well as continue to be a major employer in the Ras Gharib region for the foreseeable future.”
An initial equalization payment of US$15 million and signature bonus of US$1 million are due on ratification, with five further annual equalization payments of US$10 million each being made over five years.
Minimum financial work commitments of US$50 million per each five-year period of the primary development term, commencing on the February 1, 2020 effective date.
All investments which exceed the five-year minimum US$50 million threshold will carry forward to offset against subsequent five-year commitments.
For context, the Company’s average annual capital expenditures in Egypt over the last five full calendar years has been greater than US$30 million per year, and the Company expects to fund these future investments from existing resources and future cash flows.
The merge with existing Joint Venture Operating Companies’ (Dara Petroleum Company, West Bakr Petroleum Company and North West Gharib Petroleum Company) assets, facilities, and infrastructure into a new Joint Venture Operating Company in order to substantially increase operational efficiencies.
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