The British businessman who heads up telecoms giant BT Group is to lead a new firm targeting billion of barrels of oil in Argentina.
AIM listed Andes Energia has announced a “conditional combination” with a holding company that indirectly owns over 99.99% of PETSA, Mercuria Energy Group Limited’s Argentine oil and gas exploration and production business.
The new enlarged company will be renamed Phoenix Global Resources and be chaired by Sir Michael Rake, the chairman of BT Group, chairman of Worldpay and a director of S&P Global.
Phoenix is to focus its capital on the Vaca Muerta shale basin, which is estimated to hold 16.2 billion barrels of oil and 308 trillion cubic feet of natural gas.
In a statement, Andes Energia said: “The combination of the asset bases in Argentina is expected to create a stronger Enlarged Group with the potential to develop conventional and unconventional assets, particularly in Argentina.
“The transaction is expected to generate economic, technical and operating synergies that the Directors believe will create one of the leading Argentinian independent exploration and production companies with significant exposure to the Vaca Muerta formation, a world class resource.”
The new company will have a combined position of over 1 million gross acres in various concessions with Vaca Muerta potential.
The group will have a 63 million boe net working interest on 2P reserves and production of over 11,500 net working interest boepd on average in 2016.
In addition to Sir Michael, the board will comprise of chief executive officer, Anuj Sharma; chief financial officer, Philip Wolfe; and seven further non-executive directors, of whom four will be independent.
Sharma is currently the CEO of Andes Energia.
Sir Michael said: “I see great potential in Argentina as the political climate improves and becomes more pro-business.
“As a country, it is blessed with world class shale resources.
“With the scale, assets, financial resources and team the combination provides, I am confident the enlarged group will benefit from these encouraging trends.”
The Vaca Muerta opportunity is to be funded through Bridging and Working Capital Facilities Agreement, comprised of a Term Loan in the principal amount of approximately US$87 million and a revolving credit facility in the principal amount of approximately US$73 million.
The Vaca Muerta formation is currently one of the few economically producing shale oil formations outside of North America with production of over 65,000 boepd.
PETSA made a discovery in the basin’s Puesto Rojas earlier this year.
The resource study demonstrated potential of the Puesto Rojas licence, highlighted that it contains more than 400 million boe (best estimate) of recoverable resources.
The enlarged group will have an improved financial profile with pro-forma 2016 revenues of US$181.9 million and pro-forma 2016 EBITDA of US$56.9 million
Phoenix will have its corporate head office in London, country head office in Buenos Aires and a regional office in Mendoza.