Bridge Acquires 50 pct Stake in Duart Field

Bridge, the Oslo Axess-listed oil and gas exploration and production company announced that it has signed a Sale & Purchase Agreement to acquire a 50% working interest in the producing Duart field from Nexen Petroleum Dragon UK Limited for a consideration of $38.3 million (the “Transaction”).

The interest will add daily production of 750 barrels of oil per day to Bridge. Bridge will fund the acquisition through current cash and an expansion of its existing reserve based lending facility. No additional equity is required.

The Duart field, situated in block 14/20 on the UK continental shelf, is a very high quality Cretaceous interval oil reservoir contained in a simple high relief tilted fault block structure. The field was developed in 2007 with a single subsea development well near the crest of the structure which is supported by a strong natural aquifer drive. The well is tied back to the nearby Talisman operated Tartan platform. Product from Duart is processed on Tartan and co-mingled with other Tartan area production before being piped to the Flotta oil storage terminal.

The Duart field working interest will add 1 million barrels of 2P producing reserves to Bridge. Operating as a subsea tieback the field delivers low maintenance oil production with a very high operating margin. Bridge estimates that at an oil price of $105/bbl it will receive c. $90/bbl after tax for current production from the Duart field as a result of the company’s accumulated tax pool.

The subsea infrastructure has a relatively low exposure to decommissioning liability which is estimated to be $8.8 million net to the 50% interest. The Duart field is expected to produce until 2021.

The agreement has an effective date of 1st January 2011. The agreed consideration is $38.3million. At the expected completion date of 31 October forecast stock net to Bridge is 191,173 barrels of oil (actual production net to Bridge from 1st January to 31st August 2011 was 156,328 barrels). Corresponding operating costs for the period to 31st October are forecast to be $1.3million, after adjustment for tax. At the current oil price of c. $105, the forecast oil stock in tank at 31st October has a gross value of $20.1million, resulting in a net consideration of c. $19.3 million ($24.2/bbl at completion). In the period from 2012 to 2016, taking into account the Company’s accrued tax losses which offset tax liability, the Company expects Duart to deliver in excess of $40 million post tax cash flow.

Bridge believes the Transaction has the potential to create significant additional value through the further exploitation and optimization of the acquired interests.

The Transaction remains subject to the satisfaction of certain customary conditions including the waiver of pre-emption rights, joint venture partner approvals and approval by the Department of Energy and Climate Change.

The Transaction is also subject to the finalisation of the documents related to the expansion of Bridge Energy’s existing reserve based lending facility. An interim credit approval has been obtained from the lenders and a final credit approval is expected in due course. The increased reserve base lending facility will also support the sanction of the Company’s next development, Victoria phase II.

 Bridge’s Deputy CEO Tom Reynolds commented: “This result adds production through acquisition in line with our previously communicated strategy and we will continue to pursue other similar opportunities. The Duart acquisition will deliver additional cash flow – sheltered by the accumulated “tax pool” – for re-investment in the business. Together with the planned Victoria phase II development, using only our existing cash resources, Bridge’s production will treble to c. 3,700 boe/day by end 2012 and significantly enhance our ability to fund further growth from cash flow.”

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Source: Bridge , September, 30.  2011; Image:  Nexen