Paladin Oil Denmark Limited has signed an Assignment Agreement under which PODL will acquire from DONG a further 4.737 percent interest in Danish License 6/95, which contains the producing Siri Field, the Stine 1 oil discovery and exploration prospects, and a further 7.14286 percent interest in the producing Stine 2 oil field which also lies within the License 6/95 area.
As a result of this acquisition, brought about by the partial exercise of its pre-emptive rights in respect of the recently announced sale to DONG of Statoil's 40 percent stake in License 6/95, PODL's interest in the Siri Field, the Stine 2 Field and the Stine-1 oil discovery will increase to 30 percent. The consideration is 123.9 million Danish Kroner (approximately £10.7 million), which will be subject to adjustments for cash flows and interest between the effective date of July 1, 2002 and completion. Completion is expected to occur in late August 2002 and is subject to the approval of the Danish Energy Authority. The consideration will be met from bank facilities.
The Siri Field is currently producing at ca. 19,000 barrels of oil per day with production forecast to continue until at least 2007, and the Stine 2 Field is producing at a rate of ca. 7,500 bopd through an extended reach well drilled from the Siri Platform. Development plans for the Stine 1 oil discovery have recently been approved by the Danish regulatory authorities. This discovery is to be developed as a sub-sea satellite to the Siri Field and will come on stream in mid 2003; at peak production it is forecast to produce at a rate of 11,000 bopd.
As a result of the acquisition, Paladin's net Danish production will rise by approixmately 1400 bopd to approximately 8,000 bopd, and current Group production will rise to approximately 34,000 boepd. Reserves to be booked on acquisition will be approximately 1.0 MMbbl. Paladin will also derive incremental benefit from the opportunities for third party business associated with the Siri Field infrastructure.
In that respect, DONG has announced that plans to develop the nearby Nini and Cecilie Fields as satellites to the Siri Field have been formally approved by partners and the Danish regulatory authorities. Total reserves from the two fields are estimated to be 65 million barrels and first production is scheduled for late summer 2003. Production from both fields will be processed on and shipped from the Siri Field platform. Although PODL has no direct stake in either of these fields, it will derive economic benefit once they are on stream as a result of the sharing of Siri Field operating costs and from the receipt of tariff income from Nini and Cecilie production.
Roy Franklin, Chief Executive of Paladin, commented: 'We acquired our initial Danish interests at this time last year and have been delighted with the performance of Siri and Stine 2 to date. The announcement regarding the development of the Nini and Cecilie Fields is excellent news for Paladin; not only will there be the direct benefit of tariff income from both fields, but also a marked reduction in the unit operating costs for our own production from the Siri and Stine Fields. As a joint-venture we are optimistic that there will be further satellite development opportunities resulting from exploration in the License 6/95 area.'