Sweden-based Maha Energy has signed a binding term sheet regarding a business combination with DBO 2.0 S.A. (“DBO”) for a consideration of 36,775,410 new shares in Maha.
According to Maha, DBO is a private upstream oil and gas company focusing on mature offshore fields in Brazil formed in 2017. The company says that DBO has brought North Sea investors to invest into Brazilian assets, working with Brazilian partners and applying the most advanced North Sea approaches to identify additional reserves, develop mature oil and gas fields and increase oil and gas recovery.
Maha and DBO have agreed in the term sheet to conclude the final documents during a 45-day exclusivity period.
The transaction is subject to, inter alia, confirmatory and satisfactory due diligence, board approvals and, if applicable, regulatory approvals, and a general meeting in Maha approving the necessary resolutions. The transaction is expected to close in Q1 2023.
"Maha and DBO had their first strategic discussions in 2018. Since then, the DBO group has invested about USD 40 million in equity and built a strong position in the Brazilian E&P market, having invested in onshore fields with 3R, which was later incorporated in the listing of 3R Petroleum on the Brazilian stock exchange.
Building on the partnership with 3R Petroleum, DBO became a 15% shareholder in 3R Petroleum Offshore S.A. ("3R Offshore"), which holds operated interests in producing oil and gas fields offshore Brazil. 3R Offshore is operator A with a license to operate deepwater fields in Brazil and has two assets offshore Brazil - the Peroá cluster (100% operated working interest) and the Papa Terra cluster (62.5% operated working interest, subject to completion of transaction with Petróleo Brasileiro S.A. (“Petrobras”)," Maha said in a statement.
DBO’s major investors and shareholders are Svein Harald Øygard (29.6%), Kjetil Solbrække (20.7%), Halvard Idland (20.7%), AGR Petroleum (9.1%) and Tore Myrholt (8.4%).
The new shares in Maha issued as consideration to DBO’s shareholders will be subject to a one-year lock-up from transaction’s closing.
Maha said that the transaction would increase Maha’s net 2P reserves with approximately 18.5 mmboe and is estimated to add around 2,000 boepd net production in 2023.
The assets in DBO come with infrastructure, including the Papa Terra FPSO (after closing) and Peroa production platform, yielding lower operating costs, and of which DBO indirectly owns its pro-rata share, as a shareholder of 3R Offshore.
Based on public reserve reports from DeGolyer and MacNaughton and Gaffney Cline, the 1P and 2P reserves have an estimated value (NPV10) of USD 108 million and USD 166 million net to DBO respectively, based on an oil price of USD 71/bbl in 2023 and USD 66/bbl thereafter and a gas price in the range of USD 5.0-5.5/mcf.
The Peroá gas cluster is located in the Espírito Santo basin, offshore Brazil, in shallow waters. Approximately 72.4% gas has been recovered and remaining 2P reserves are estimated to 19 mmboe gross per year-end 2022.
The cluster has a 55km gas pipeline connection to the Cacimbas gas processing plant (operated by Petrobras) and has an unmanned platform owned by 3R Offshore with opex of approximately USD 5/boe.
The Peroá cluster includes the Peroá and Cangoá producing fields and the Malombe discovery. Malombe is considered to be tied back to the Peroá platform in the future and could add an estimated production of 16 kboepd (gross) at peak. During October 2022, gross production at the Peroá cluster was 2.5 kboepd (gross).
3R Offshore agreed the acquisition of the Peroá cluster from Petrobras in February 2021 and the acquisition closed in 2022.
Papa Terra is a heavy oil field located in deep waters in the Campos Basin, approximately 100km off the coast of the State of Rio de Janeiro, Brazil. Approximately 2.4% of the oil has been recovered as of October 2022, and gross 2P reserves are estimated to 166 mmboe per year-end 2022.
This represents a 11.4% recovery factor, which compares with an average of 15.6% for the Campos Basin, suggesting further upside potential beyond the 2P reserves, Maha said.. During October 2022, gross production was 16.0 kboepd and production is expected to increase in the coming years due to increased drilling activity.
Papa Terra was discovered in 2003 and production started in November 2013. The field is developed with an FPSO (P-63) and a Tension Leg Wellhead Platform (P-61), both owned pro rata by the owners of the oil field, with a combined processing capacity of 140,000 barrels of oil per day, an injection capacity of 340,000 barrels of water per day, a storage capacity of 1.4 million barrels and slots to connect up to 21 producing wells and 11 injecting wells. Currently, 6 production wells and 3 injection wells are active and all systems have idle capacity to implement revitalization and redevelopment activities.
3R Offshore agreed the acquisition of Petrobras’ working interests (62,5%) in the Papa Terra Cluster in July 2021 and this acquisition is subject to a specific condition precedent.