Wentworth Resources PLC (AIM:WEN) has struck a deal to acquire Scirocco Energy PLC's (AIM:SCIR) 25% stake in Aminex PLC's (LSE:AEX) Ntorya field development project in Tanzania.
It is a deal that has made sense on paper for some time given that Scirocco has been open to sale and that Ntorya lies adjacent to Wentworth’s 32%-owned flagship Mnazi Bay gas field.
For Scirocco, it seals a divestment for a project that will require capital investment in the coming months. It intends to use the proceeds to support its planned new investments in sustainable energy and ‘circular economy’ opportunities.
Wentworth is paying US$3mln upfront to Scirocco with a further US$13mln tied to future development and production milestones (of which US$8mln will come from a revenue share arrangement once the field is in production).
"This is a transformational transaction for Wentworth establishing us as a dual-asset, full-cycle E&P with a significantly enhanced resource base and production profile,” said Wentworth chief executive Katherine Roe.
“The deal represents an attractively priced, low-risk entry into a high growth opportunity which cements our position as a leading supplier of domestic gas to Tanzania.”
Roe added: "This compelling growth opportunity is fully aligned with our commitment to support the government to reach its goal of providing universal energy access by 2030 in accordance with our purpose to empower people with energy and deliver value for Tanzania, Wentworth and all our stakeholders."
Ntorya has been estimated to host some 1.9 trillion cubic feet of gas and as such offers significant future development potential.
Investors in Aminex and Scirocco have had to show patience in recent years as the potentially substantial project was kept in the slow lane whilst the partners sought sufficient funding, before Aminex landed a farm-out deal with ARA Petroleum, a subsidiary of Oman’s Zubair Corp.
ARA acquired a 50% stake in the project, committing to a US$140mln capital investment programme which includes drilling the Chikumbi-1 well later this year.
The Ntorya field is targeted to begin commercial gas production before the end of 2024.
According to Wentworth, the asset promises to deliver a “transformational increase in Wentworth's production and resources”, and, will position the company as “the leading domestic gas player in Tanzania”.
The Chikumbi-1 well aims to confirm some 763bn cubic feet of contingent (2C) resources for development, setting up a final investment decision in 2023. A commercialisation study, inked in 2017, anticipated that a full field development to deliver 140mln cubic feet per day of production would require around US$143mln of gross capital expenditure, though an updated view of costs and project scope will be determined in due course by the Ruvuma partners.
In the coming months, Wentworth will be required to fund US$6.25mln for seismic and drilling costs for Chikumbi-1.
Drilling is slated to start for the pivotal well in November.