Activity is starting to occur within the junior oil and gas space. Tenaz Energy Corp (TSX: TNZ) this morning indicated it will be purchasing additional production via an all-share transaction, whereby it acquires London-based SDX Energy PLC.
“This Transaction is an important step in the execution of our strategy for international growth. The Egyptian and Moroccan operations are within our primary regions for long-term focus, and we believe that these are high quality assets with numerous desirable organic investment opportunities. In addition, we believe that these areas offer opportunities for continued consolidation and resulting growth,” said Tenaz CEO Anthony Marino.
The transaction will see SDX shareholders receive 0.075 common shares of Tenaz for each share of SDX currently held. The figure is said to represent a premium of 28% based on yesterdays closing price of Tenaz, valuing SDX at a total figure of $34.3 million.
In terms of assets, SDX currently has producing assets within both Morocco and Egypt, in addition to $23.7 million in working capital, of which $13.5 million is cash. The firm also holds no debt, and has $89 million in Canadian tax pools. 2022 guidance has pointed to production of 3,300 to 3,550 mboe/d, compared to Tenaz’s currently 1,200 to 1,300 mboe/d guidance.
In Egypt, the company currently owns a 67.0% interest in the Ibn Yunus North gas field, and a 36.9% interest in each of the South Disouq and Ibn Yunus gas fields. South Disouq is expected to produce up to 3,205 boe/d in 2022, which translates to up to 2,420 boe/d on an entitlement basis. The firm also has a 50% non-operated interest in Meseda and Rabul fields, where a 13 well drill program is currently underway. Entitlement production is expected to be as much as 505 bbl/d.
Within Morocco, SDX meanwhile has a 75% interest in four exploration permits. Total production within the country is estimated to be up to to 625 boe/d. Collectively, the firm has proven and probable 2P reserves of 7.0 mmboe.
The transaction remains subject to approvals from the TSX, Egyptian and Moroccan regulators, and shareholders of both parties. Closing of the transaction is currently anticipated for late July or early August.
Tenaz Energy last traded at $2.19 on the TSX.
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