Horizon Petroleum has entered into a Letter of Intent (LOI) with a private European entity (Farmee) for a farm-in on the Lachowice conventional natural gas field in the Bielsko-Biala concession in southern Poland, which it is in the process of acquiring.
Image: Onshore drilling. Photo: courtesy of Stuart Miles/Freedigitalphotos.net.
Under the terms of the LOI, the Farmee has agreed to fund 100% of the capital expenditures required to bring the Lachowice field to first production, with Horizon continuing as operator. In return, the Farmee will receive 50% of the equity in Horizon’s subsidiary that will hold the Bielsko-Biala Concession.
After satisfying the capital commitment (the “Farm-in Obligation”) and earning its 50% of the equity, future expenditures and profits on the Bielsko-Biala Concession will be shared equally.
The Farm-in Obligation includes funding all costs related to drill, complete and test the first well as well as the surface production equipment required to produce the well. In aggregate, the Farm-in Obligation is expected to total approximately US$8 million (approximately C$10.5 million).
The first well is expected to spud late in the first quarter of 2019, with initial production estimated at 3 MMCFD (facilities constrained) expected to begin in the fourth quarter of 2019.
The LOI is non-binding and is subject to a number of conditions, including formal documentation of a Joint Operating and Shareholder Agreement, confirmation of the Farmee’s financial capacity, the closing of Horizon’s acquisition of the Bielsko-Biala Concession and required regulatory approvals.
The Farm-in Obligation provides Horizon with an accretive plan to finance the capital expenditures to reach first production.
The LOI relates only to the Bielsko-Biala Concession, which forms a portion of Horizon’s acquisition of five concessions in Poland (the “Acquisition”).
The details of the Acquisition are contained in Horizon’s previously issued press releases dated September 19, 2017 and June 13, 2018. The Acquisition is expected to close in the third quarter of this year. The remaining four concessions will be owned 100% by Horizon after closing of the Acquisition.
Source: Company Press Release