Oryx Petroleum has announced that it has resumed drilling activities at the Demir Dagh field in the Hawler licence area in the Kurdistan Region of Iraq and that it has agreed with the vendor of OP Hawler Kurdistan Limited, the subsidiary of the Corporation that holds interests in the Hawler license area, to restructure the contingent consideration payment due upon a second commerciality decision in the Hawler license area. All dollar amounts set forth in this news release are in United States dollars, except where otherwise indicated.
Demir Dagh Update
The TTS-150 rig contracted from International Oil Tools (“IOT”) has commenced drilling/re-completion activities at the Demir Dagh field. The rig will first re-complete the Demir Dagh-3 well in the Jurassic reservoir. The re-completed well is expected to produce a 35-40° API gravity crude oil through existing facilities in early 2016. The Demir Dagh-3 re-completion will be followed by the re-completion of three further Demir Dagh wells in shallower zones of the Cretaceous reservoir, which are expected to enhance the wells’ current production levels during the first quarter of 2016.
Revised Hawler Contingent Consideration
Oryx Petroleum has agreed with the vendor of OP Hawler Kurdistan Limited, the subsidiary of the Corporation which was acquired in 2011 and that holds a 65% participating and working interest in the Hawler license area, to restructure the contingent consideration due upon a second commerciality decision in order to better align payments with progress of the planned Zey Gawra field appraisal and development.
The original agreement specified that the entire amount of the contingent consideration of $71 million would become due upon reaching a second positive commerciality decision in the Hawler license area. Under the terms of the revised agreement, upon reaching a positive commerciality decision on the Zey Gawra field, the Corporation will become obliged to pay four annual instalments, each along with accrued interest.
The first three instalments will each be equal to approximately 20% of the $71 million total contingent consideration due to the vendor and the final instalment will be for the remaining balance of the contingent consideration. Oryx Petroleum anticipates that any decision on commerciality for the Zey Gawra field will not occur until 2017.
Commenting today, Oryx Petroleum’s Chief Executive Officer, Michael Ebsary (pictured), stated:
“We are delighted to resume drilling activities at the Demir Dagh field after a period of inactivity and are excited regarding the DD-3 Jurassic well’s potential to add significantly to our current production.
"We are also very pleased to restructure the contingent consideration payments for our interests in the Hawler license area. The agreement better aligns future consideration payment obligations with future cash flows, providing us with the ability to proceed with our Zey Gawra field plans. We are very much looking forward to beginning the appraisal and development of the Zey Gawra field.
"Finally, we have drawn the second $50 million tranche of funding under the previously announced loan from The Addax and Oryx Group, which will fund our 2016 budgeted capital program well into next year while we continue advanced discussions to fund the balance of the program.”