Pacific Energy Development to acquire assets in Kazakhstan

Oil&Gas Materials 18 September 2013 17:17 (UTC +04:00)
Pacific Energy Development, an energy company engaged in the acquisition and development of strategic high-value energy projects in the U.S. and Asia

Azerbaijan, Baku, Sep. 18 / Trend E. Kosolapova/

Pacific Energy Development, an energy company engaged in the acquisition and development of strategic high-value energy projects in the U.S. and Asia, announced the entry into Kazakhstan through an agreement to acquire an approximate 34 percent indirect interest in Aral Petroleum Capital Limited Partnership.

The assets will be purchased from Asia Sixth Energy Resources Limited, which Contract Area covers 380,000 acres within the North Block located in the Pre-Caspian Basin.
Aral Petroleum is a Kazakhstan entity which holds a 100 percent operated working interest in a production license covering the contract area issued by the Republic of Kazakhstan that expires in 2035 in western Kazakhstan.

"This basin is the largest currently producing basin in Kazakhstan," the company said.

The Contract Area is located in Aktobe Oblast in Western Kazakhstan, and includes the producing and developing areas of the East Zhagabulak field and the exploration areas of Baktygaryn, Itassai, Kodzhasy and West Kodzhasy fields. In 2012, Aral Petroleum produced approximately 11,385 tons of oil equivalent (approximately 86,910 barrels of oil equivalent) from 5 wells, and the asset is currently producing an average of approximately 383 barrels of oil equivalent per day from 3 wells, as it works to rework and retest other wells on the asset. Aral is currently testing 2 wells on the asset, and plans to complete testing on a total of 4 wells in 2013. Aral Petroleum also plans to conduct 2D and 3D geographical operations and engineering designs over an additional 123,553 acres on the asset. To date, Aral Petroleum has spent approximately $134 million on exploration and development of the asset.

Under the agreement, the Company plans to effectively take control of Aral Percent through acquisition of a 51 percent controlling interest in Asia Sixth by way of subscription of shares of Asia Sixth, which in turn currently holds a 60 percent controlling interest in Aral. Asia Sixth's interest in Aral is scheduled to increase to 66.5 percent following the completion of certain transactions to occur between Asia Sixth and Asia Sixth's partner in Aral that currently holds the remaining 40 percent interest in Aral. Upon closing and completion of the Aral Transactions, Aral will be owned 66.5 percent by Asia Sixth, which will be controlled and managed by the Company. Thus, the Company, through its 51 percent majority ownership in Asia Sixth, will own an approximately 34 percent interest in Aral and have control of Aral through its control of Asia Sixth.

The Company has paid an initial deposit of $8 million to Asia Sixth, and shall increase its initial deposit by up to $12 million to a total of $20 million contingent upon receipt of payment in full to the Company from certain investors under promissory notes maturing in September 2013 and December 2013. The deposit is subject to full refund to the Company in the event the transaction does not close, other than as a result of the Company's material uncured breach. This money will also be used, in part, to recomplete and rework currently producing wells with the hope of significantly increasing their production rates. Based on how these wells perform, at closing, the Company shall owe to Asia Sixth a final closing payment equal to an additional: $20 million if the daily average volume of oil produced by Aral over a specified 30 day period equals or exceeds 1,500 barrels of oil per day; $15 million if the Target Volume equals or exceeds 1,000 barrels of oil per day but is less than 1,500 barrels of oil per day; or $0 due if the Target Volume comes in less than 1,000 barrels of oil per day.

The closing of the transaction is anticipated to occur in September 2014, subject to the satisfaction of certain customary closing conditions including the approval of the Agency of the Republic of Kazakhstan for the Protection of Competition and the Kazakh Oil and Gas Ministry , and the ministry's waiver of its pre-emptive purchase right with respect to the transaction.

The Company's ability to pay the final closing payment (if and to the extent due) is contingent upon the Company securing sufficient financing, of which there can be no assurances.

Pacific Energy Development , is a publicly-traded energy company engaged in the acquisition and development of strategic, high growth energy projects, including shale oil and gas assets, in the United States and Asia. The Company's principle assets include its Niobrara asset located in the DJ Basin in Colorado, its Mississippian asset located in Comanche, Harper, Barber and Kiowa Counties, Kansas, its Eagle Ford asset in McMullen County, Texas, and its North Sugar Valley asset located in Matagorda County, Texas. Pacific Energy Development is headquartered in Danville, California, with offices in Houston, Texas and Beijing, China.