Irish oil and gas explorer PetroNeft completes Russian gas well deal

Irish oil and gas explorer PetroNeft Resources has completed its acquisition of a 40 pre cent stake in a Russian gas well.

The company, which operates in the Tomsk Oblast, Russia, said on Monday that it has completed the deal with Belgrave Naftogas, formerly Arawak Energy Russia, in relation to Licence 67. The deal means that PetroNeft's interest in the licence has risen from 50 per cent to 90 per cent. PetroNeft also has a 50 per cent operated interest in Licence 61.

Licence 67 contains two oil fields, Ledovoye and Cheremshanskoye and several exploration prospects. The transaction value is $2.9 million (€2.44m), which has been satisfied through the issuance of 80,000,000 PetroNeft ordinary shares to Belgrave Naftogas for a value of $1.2 million, and cash consideration of $1.7 million, which will be financed through a three-year loan from Belgrave Naftogas to PetroNeft.

David Sturt, chief executive of PetroNeft, said the licence is an asset which has "significant potential value".

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“Over the last two years, our understanding of this licence has improved considerably and we are delighted to be bringing it into production. With oil prices improving and a favourable tax treatment for this licence, we see this as an investment which can deliver significant value at low cost,” he said.

As a result of the deal, the PetroNeft shareholding of its chairman, Alastair McBain, will increase to 70,298,500 ordinary shares, representing a 7.6 per cent interest in the company. This is because Mr McBain is also a director of Belgrave Naftogas, a wholly owned subsidiary of Sarum Energy, where he holds a 72 per cent interest.