Crown Point Energy announced that its wholly-owned subsidiary, St. Patrick Oil & Gas (formerly named Apco Austral) (St. Patrick), has entered into an agreement with its partners to sell a portion of its participating interest in the Rio Cullen, Las Violetas and La Angostura hydrocarbon exploitation concessions located in the Tierra del Fuego region of the Austral basin in southern Argentina (TDF Concessions).
Image: Crown Point to sell stake in exploitation concessions in Tierra del Fuego, Argentina. Photo: Image by rawpixel from Pixabay.
In June 2018, Crown Point acquired St. Patrick (the “Acquisition”) from a third party (the “Vendor”) for US$28.4 million of cash consideration plus up to US$9 million of contingent royalty payments pursuant to a royalty agreement (the “Royalty Agreement”) during a ten-year period commencing on January 1, 2018 (the “Royalty Period”). In addition, Crown Point paid US$4.4 million of withholding taxes to Argentine tax authorities in connection with the Acquisition. St. Patrick holds a 25.7796% participating interest in the TDF Concessions. Following the completion of the Acquisition, Crown Point and its subsidiaries collectively hold a 51.56% participating interest in the TDF Concessions.
Pursuant to the Joint Operating and Union Transitoria de Empresas Agreement governing the TDF Concessions (the “UTE Agreement”), St. Patrick’s partners in the TDF Concessions (each an “UTE Partner”) had a right of first refusal (“ROFR”) to acquire St. Patrick’s participating interest in the TDF Concessions. One of the UTE Partners disputed the validity of the ROFR notices issued to the UTE Partners and, among other things, commenced arbitration proceedings against St. Patrick and the Vendor under the UTE Agreement in order to have an arbitration tribunal consider and rule on the dispute. In December 2018, the arbitration tribunal ordered St. Patrick and the Vendor to comply with the provisions of the UTE Agreement that grant the ROFR to acquire St. Patrick’s participating interest in the TDF Concessions to the other UTE Partners. In compliance with the arbitration tribunal’s decision, St. Patrick and the Vendor subsequently provided notice to its UTE Partners of the indirect transfer of St. Patrick’s participating interest in the TDF Concessions that resulted from Crown Point’s acquisition of St. Patrick. All of St. Patrick’s UTE Partners subsequently exercised their ROFRs to acquire their proportionate share of St. Patrick’s participating interest in the TDF Concessions.
ROFR Sale
St. Patrick has now entered into a purchase and sale agreement (the “ROFR PSA”) with its UTE Partners to sell them, in aggregate, a 16.8251% participating interest (the “ROFR Interest”) in the TDF Concessions (collectively, the “ROFR Sales”) for US$13.5 million in cash (the “Base Price”), plus certain contingent consideration (the “Additional Consideration”). The Additional Consideration shall be (i) equal to 65.2651% of all royalties accrued under the Royalty Agreement from the Closing Date (defined below) until the end of the Royalty Period, and (ii) capped at US$5,873,859 less 65.2651% of all royalties paid or payable by St. Patrick under the Royalty Agreement up to the Closing Date. The Base Price will be paid free and clear of any deduction, discounts, withholdings and any applicable taxes (other than any stamp taxes that apply, which shall be shared equally between St. Patrick and the UTE Partners, and other than any applicable taxes arising from any amount payable on account of the Additional Consideration).
During the three months ended December 31, 2018, the ROFR Interest produced an average of 2,458 boe per day, weighted approximately 61% to crude oil and natural gas liquids and 39% to natural gas. Crown Point’s reserves volumes were audited by Gaffney, Cline & Associates Inc. (“GCA”) as at December 31, 2018 in accordance with National Instrument 51-101 and the Canadian Oil and Gas Evaluation Handbook. GCA assigned the ROFR Interest 3.2 million boe of total gross proved reserves and 4.6 million boe of total gross proved plus probable reserves. Additional information regarding the TDF Concessions are contained in Crown Point’s continuous disclosure documents, which can be accessed on the SEDAR website (www.sedar.com) and on Crown Point’s website (www.crownpointenergy.com).
Completion of the ROFR Sales is subject to customary closing conditions. The ROFR Sales are expected to close between April 22 and April 26, 2019 (collectively, the “Closing Date”) and may occur on various dates with different UTE Partners. Following the completion of the ROFR Sales, Crown Point’s participating interest in the TDF Concessions will decrease from 51.56% to 34.7349%.
Source: Company Press Release