Agip announced the pre-arranged decision a day after drilling at the Tiof West step-out exploration well, 8km to the west of the initial Tiof-1 discovery well, intersected a gas column of around 4m overlying a gross oil column of 122m, pushing field estimates above the 200mmbbl mark.
Operator Woodside will initially acquire 100% of the shares in Agip Mauritania BV, a wholly owned subsidiary of the Italian oil and gas company ENI Exploration BV, and will then on-sell the pro-rata interest entitlement to the remaining joint venturers on the same terms.
The news has obviously had a dramatic financial effect with Woodside soaring to its highest level in around twelve months hitting $14.84, up 48 cents in early trading. Hardman has jumped 8 cents to 74, a 15% increase in the last three days on trading of around 15 million shares, while Roc has risen slightly to $1.48.
Agip currently holds a 35% interest in Area A, which contains the Banda discovery, and Area B, which contains the Chinguetti and Tiof discoveries, and reached agreement some months ago to sell its interest to a third party, prior to the successful Chinguetti 4-5 early development well and the Tiof oil and gas discovery.
The total cost of the acquisition of ENI's equity is expected to be approximately US$62 million plus adjustments. In addition, a contingent payment of up to US$15 million may be paid on completion of certain exploration, development and production success milestones.
As a result, Roc Oil's interest in PSC Area A, which contains the Banda Oil and Gas discovery, will increase from 2.7% to 4.155% and its interest in PSC Area B, which contains the Chinguetti and Tiof oilfields, will increase from 2.4% to 3.693%.
Hardman's interest in PSC A will increase from 24.3% to 37.384% and in PSC B from 21.6% to 33.23%.
Woodside will emerge as the real winner with a majority stake in both areas, up from 35% to 53.846%, while Fusion will boost its PSC A interest to 4.61% and in PSC B from 6% to 9.23%.
"The opportunity to increase our interest in the two core Mauritania PSCs is very fortunate, particularly as it comes at a price negotiated in a sale to a major company before the successes from the 2003 drilling program," said Hardman's managing director, Ted Ellyard.
"Hardman will now rank as the second largest equity holder in all of the offshore Mauritania licenses (see map) in this emerging world class petroleum province. We are sure that Mauritania will provide the Company with strong growth potential in the near and longer term.
"The Tiof discovery has the potential to dramatically increase the value of these Mauritanian areas in the short term," said Ellyard.
The Joint Venture is scheduled to make a final investment decision on the Chinguetti development by mid-2004 with first production expected in late 2005. This follows the successful production test of the Chinguetti appraisal-early development well in October this year.
Independent analyst Peter Strachan said the purchase "represented excellent value to the Aussie team, equating to less than US$1 per barrel of estimated P10 resources at Chinguetti, Banda and Tiof and is about US$2.20/bbl based only on the reserves stated at Chinguetti.
"The major point in all this is that AGIP negotiated the price of US$62m prior to the Chinguetti flow test and prior to the ~200 mmbo Tiof discovery, so the price was then based on 120 odd mmbbls at Chinguetti plus Banda, which is still not seen as commercial.
"This price equates to US$1.5/bbls of oil at Chinguetti but recent work in proving up Chinguetti plus the Tiof discovery brings the price way down, even after adding about US$100m for the total cost of the recent drill programme since 1 August.
"Perhaps this news explains the 'surprise' rise in WPL last Friday!" he said.
