Prospex Energy plc confirmed that on 19 August 2024, the Company completed the acquisition of 7.5% of HEYCO Energy Iberia S.L. (“HEI”), which has majority ownership in the Viura gas field in northern Spain, having raised, in aggregate, gross proceeds of approximately £4.2 million, as announced on 8 August 2024.
The acquisition marks a further important step in the development of the Company’s strategy to become a mid-tier independent European energy producing group.
Highlights:
By committing to fund 15% of the 2024-2026 HEI development programme, Prospex now owns 7.5% of HEI. Following the completion of the acquisition of SHESA’s interest in the concession, HEI will own 96.4865% of the Viura concession, its reserves, existing production and the surface facilities. This will translate to a Prospex ownership of 7.2365% in the Viura concession.
This is not a standard “2:1 Promote” transaction. Whilst Prospex is funding 15% of costs to earn 7.5% of HEI, the Company will not only earn a 10% coupon on its capital investment but will also be repaid its capital investment from 15% of the HEI production income (after OPEX and taxes), until payback at which point Prospex’s share of net income reverts to 7.5%.
Viura estimated gross remaining reserves is 90 Bcf (2.5 Bcm) which is 6.5 Bcf (0.18 Bcm) net to Prospex.
The Viura 1B development well is expected to reach the reservoir horizon in the next two to three weeks and is expected to be generating revenues from production as early as October.
Prospex is contributing to the funding of the 2024 development programme, including the Viura-1B well, at a cost of £3.51 million which is 15% of the estimated £23.4 million total costs in 2024.
Prospex’s 15% share of the 2025/2026 development programme is estimated at £4.84 million, which is to be funded by future cash calls or from Phase 1 production or both.
Based on a conservative gas price assumption of €31/MWh, Prospex estimates that this £4.84 million figure will be reduced by production income to ~£2.7 million by May 2025 when the cash call is due for the 2025 drilling campaign.
If the gas prices achieved in the coming year are higher, then the requirement for further funding is reduced or even negated.
The current TTF gas price is approximately 30% higher than €31/MWh at ~€39/MWh.
Completion of this acquisition was confirmed by HEYCO Energy Group Inc. (“HEGI”), the majority owner of HEI, on 19 August 2024, when HEGI confirmed receipt of US$4,342,500 for the purchase by PXOG Muirhill Limited, a wholly owned subsidiary of Prospex, of 7.5% of the total shares in HEI.
In Spain there are only three producing onshore gas fields: El Romeral; Viura and Marismas. Prospex currently owns a 49.9% share in El Romeral. HEI currently has a 58.7964% interest in Viura. The other participants in the ownership of the Viura Field Development are Sociedad de Hidrocarburos de Euskadi, S.A. (“SHESA”) (owner of the 37.6901% of the Concession) and Oil and Gas Skills, S.A. (owner of the 3.5135% of the Concession). On 5 April 2024, HEI entered into an asset purchase agreement with SHESA for the acquisition of the participation of SHESA in the Viura Field Development which is subject to the fulfilment of certain conditions precedent. Following the acquisition of SHESA’s interest, HEI will have HEI a 96.4865% interest in Viura, therefore Prospex will indirectly own 7.2365% of the Viura concession, its reserves and the existing surface production facilities of the Viura gas plant, which is connected to the Spanish national grid, through its 7.5% shareholding in HEI.
The Viura producing gas field onshore in northern Spain has an estimated original gas in place of 211 Bcf (6 Bcm) and estimated reserves of 105 Bcf (3 Bcm). To date, just 16 Bcf (0.5 Bcm) of gas has been produced from Viura meaning that the remaining reserves are 90 Bcf (2.5 Bcm) which is 6.5 Bcf (0.18 Bcm) net to Prospex.
