Canada-based New Stratus Energy has signed a letter of intent (LOI) with some affiliates of Spanish energy company Repsol for the potential acquisition of certain upstream and midstream assets in Ecuador.
Following the completion of the deal, the Canadian firm will have an indirect operated working interest of 35% in service contracts for Blocks 16 and 67 in Ecuador.
Under the deal, New Stratus Energy will also hold an indirect participation stake of 29.66% in Oleoducto de Crudos Pesados Ecuador (OCP), the holding company of a 485km long pipeline of the same name.
New Stratus Energy chairman and CEO Jose Francisco Arata said that the deal is part of the company’s strategy to strengthen its footprint in the Sub-Andean geological basins by pursuing projects with existing production and potential for exploratory activities.
Details of the acquired assets
Located in the Oriente Basin in Orellana Province, Blocks 16 and 67 put together have 13 producing fields.
The production from the fields is 17,800 barrels of oil per day (bopd), of which New Stratus Energy’s share will be 6,200bopd.
The two Ecuadorian blocks collected primary production of 362 million barrels (MMBBL), as of December 2019.
The oil drawn from the two blocks is sent through a 16inch pipeline to Lago Agrio, where it enters the OCP pipeline and is transported to a port of Ballao on the Pacific Ocean.
Built with an investment of $1.5bn, the OCP pipeline, which runs from the Oriente Basin, transports nearly 30% of Ecquador’s oil and possessing capacity of 450,000bopd.
Arata said: “Featuring no upfront capital costs and stable dividend income from the pipeline assets, the unique structure of this acquisition has the potential to generate substantial value for our shareholders.
“After the completion of this acquisition, New Stratus will have access to and operate assets with production of approximately 18,000 barrels of oil per day (bopd) (2019 Production).
“This transaction would provide New Stratus increased scale and complement its capabilities while improving its positioning and access to additional opportunities, such as selective bids rounds and secondary flow of material size and quality.”
As per the terms of the deal, the Canadian oil and gas firm will pay a maximum of up to $12m to the sellers, and this includes $5m of guaranteed cash payment, while the remaining part will be contingent payments.
Completion of the deal will be subject to certain customary regulatory approvals and meeting of other conditions.
