Approval for the transaction has been received from the Government of Somaliland and the Company expects completion under the Second Sterling Agreement within the next week.
In November 2013 Jacka announced JRSL’s farmout of a 15% participating interest in the Odewayne block to Sterling (the 'Original Sterling Transaction'). That transaction closed in January 2014 after receiving government approval.
Under the terms of the Second Sterling Agreement:
Sterling will acquire an additional 15% interest in the PSC from JRSL, effective on completion;
Sterling will pay JRSL US$2.4 million on signature of the Second Sterling Agreement and $9.6 million on completion;
JRSL will cancel the US$12 million future conditional payments due under the Original Sterling Transaction;
Although this transaction results in JRSL’s departure from the PSC, Jacka retains an option to acquire a 5% participating interest arising from its original farm-in agreement with Petrosoma Limited (1). The option can be exercised on the earlier of the proposal of a second well in the PSC or the parties entering into the Fifth Period of the PSC.
The PSC is currently in the Third Period (expiring November 2014) with an outstanding minimum work obligation of 500 km of 2D seismic. The minimum work obligation during the Fourth Period of the PSC (expiring May 2016) is for 1,000 km of 2D seismic and one exploration well. Operations in Somaliland have been delayed by security concerns and Genel Energy, the operator on behalf of the joint venture partners, is working with the Ministry of Energy and Minerals to resume operations as soon as practicable.
Jacka’s Managing Director, Mr Bob Cassie commented:
'Jacka’s challenging past nine months have been well documented elsewhere. As a result of these circumstances it has been imperative that the Company looks to its asset base to provide it with the necessary funding for working capital and to maintain progress on its other assets. With the funds from this transaction, the recent placement and the current fully underwritten entitlements issue to raise a combined $3.9 million, Jacka will emerge with a strong balance sheet and can now look forward to progressing the Aje Field (OML113 offshore Nigeria) through a final investment decision (expected in mid-2014) and into development; as well as further appraisal of the Hammamet West oilfield, offshore Tunisia; and exploration on OML113, in the Bargou permit surrounding the Hammamet West field, and the Ruhuhu licence, onshore Tanzania.
'Jacka remains enthusiastic about Somaliland and considers the option to acquire another 5% interest in the future as providing the Company and its shareholders with an opportunity to re-enter the project as work advances. Jacka would like to take this opportunity to thank the joint venture partners and the Somaliland government for their assistance over the years and in approving this key transaction for the Company. We wish them and the people of Somaliland success with the future exploration program.'
The PSC participants are:
Prior to farmout Post farmout
Genel Energy Somaliland (Operator) 50% 50%
Jacka Resources Somaliland 15% 0% (1)
Sterling Energy (East Africa) 25% 40%
Petrosoma 10% 10%
Note 1: Jacka retains an option to acquire a 5% participating interest through its initial farm-in agreement with Petrosoma. The option requires Jacka to carry Petrosoma through exploration activity up to a capped amount of total project expenditures. On the basis of current estimates of the project expenditures, the expenditure cap may be reached before Jacka exercises the option resulting in Jacka’s carry obligations being satisfied.
The Odewayne PSC covers Block SL6 and part of Blocks SL7 and SL10, onshore Somaliland, comprising an area of 22,840 sq kms. Jacka entered the Odewayne PSC in March 2012 through a farm-in to Petrosoma’s interest, initially acquiring 50% with the potential to ultimately increase to 85%. Jacka’s regional studies highlighted this as an area likely to contain a sedimentary basin analogous to the multi-billion barrel producing basins in Yemen. Initial reprocessing of gravity data by Jacka demonstrated the existence of a deep basin with potentially attractive structural trends and these were confirmed by an aeromagnetic and gravity survey acquired in early 2013.
In late 2012 Jacka completed a transaction with Genel Energy, whereby Genel acquired a 50% interest in, and operatorship of, the Odewayne PSC. JRSL retained a 30% interest. Under the terms of that transaction, Genel will fund 100% of the exploration program in the Odewayne Block until the end of the Fourth Period. Subsequently, in November 2013, JRSL farmed out a 15% interest to Sterling in return for US$3 million in cash paid on execution of the farmout agreement and up to a total of US$12 million in additional payments as work program milestones were achieved. JRSL retained a 15% interest.
The next planned stage of the work program includes acquisition of an extensive 2D seismic programme to define drillable targets, however, operations in Somaliland have been delayed by security concerns and the Operator, on behalf of the joint venture partners, is working with the Ministry of Energy and Minerals to resume operations as soon as practicable.
Click here for Sterling Energy announcement: Additional farmin to Odewayne Block (Republic of Somaliland)