Goldcreast today hailed its “transformational acquisition” of Georgian oil and gas assets.
The firm snapped-up a 100% interest in the producing Norio onshore oil field Production Sharing Agreement (PSA) and an option to form a farm-in agreement to acquire a 70% interest in Block VIII PSA, which hosts the East Khavtiskhevi onshore field in the Republic of Georgia.
The deal, which will be closed with cash and shares in the company, marks a “transformational step in the Company’s genesis and provides access to two highly prospective blocks in a politically friendly jurisdiction”, according to the firm.
Paul Haywood, director, said, “This is a transformational deal for the company and provides us with exposure to two highly prospective blocks, one of which has existing production. We believe a low cost work programme will increase production significantly and allow us to achieve cash flow positivity within the year. Additionally, with further investment we believe we can work with our partners to maximise the significant exploration upside that the Norio and East Khavtiskhevi blocks have.
“Importantly, there is fantastic oil and gas infrastructure in the Republic of Georgia, the Norio field is only 4km from the Baku-Supsa pipeline and fit for purpose rigs are available in country.
“The country is rapidly becoming a highly exciting oil and gas destination and is one of the best jurisdictions in the region for ease of doing business and transparency. We believe Goldcrest is well positioned to take a defining role in the resurgence of the industry in the Republic of Georgia, an industry which once produced over 70,000bopd but has since dwindled to <2,000bopd due to lack of investment.”
The company said it would dispose of existing gold assets in Ghana and then use the proceeds to focus on a new oil and gas strategy.
The Norio and Block VIII cover 4,722.5 sq km.
Norio is a 22.5 sq km onshore oil field drilled in the Soviet era that has produced 1.9MMbbl to date and which Schlumberger estimated contains 118.7 MMbbl STOIIP.
There is extensive existing data available including 400km of seismic data. The PSA is valid until 2026 with optional five year renewal and there are no minimum work programme commitments. The current production is 25bbls/d of light sweet oil from three wells drilled in the mid/late 1970s and is currently generating sufficient revenue to cover operational costs.
Goldcrest plans to increase this production rate to 250 bbls/d and move the company into free cash flow territory within six months of the work programme commencing.
To date, development of the Norio field has been hindered by the lack of capital and the recent global pricing environment of oil. Breakeven oil price on completion of the planned workovers, is believed to be sub $20 bbl oil.
Under the terms of the agreement Goldcrest is paying US$380,000 to acquire a 38% interest in the Norio Block.
As part of the consideration the company has committed to issuing shares valued at US$300,000 to Georgia Oil and Gas at a share price of 0.5p, conditional on resolutions being passed at the next General Meeting granting the board sufficient authorities to issue the shares. The company has the option to acquire the remaining 62% interest in the PSA via a payment of $620,000 and the issuance of further shares in the equity of the company to a value of $250,000.
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