Sirius acquires interest in Nigeria's Ke oil field

Sirius (SRSP) is pleased to announce that it has entered into an acquisition and joint operating agreement with Del Sigma Petroleum for development of the Ke marginal oil field which has aggregate recoverable hydrocarbon reserves estimated to be in excess of 25 million barrels of oil (2P reserves) and is located in Oil Mining Lease 55 (OML 55) in Nigeria. Completion of this Agreement will be conditional on shareholder approval and approval from Nigeria’s Department of Petroleum Resources. 

Under the terms of the Agreement, Sirius is entitled to a direct 40 percent interest in the Ke oil field, and an application will be made for this interest to be registered with the DPR. Sirius will jointly operate the Ke Asset with Del Sigma, and fund 100 percent of the development costs. Upon production of oil, Sirius will receive a net preferential cash flow of 78 percent from the production revenues until full recovery of its investment following which its cash receipts will revert to 40 percent to match its underlying economic interest in the field pursuant to the Agreement. 

There is no Farm-in consideration payable in relation to the Transaction. Del Sigma have incurred substantial historical sunk costs on the Ke Asset and, as part of the Transaction, Sirius has agreed to make initial payments to Del Sigma amounting to US$2 million which will be paid as to US$500,000 on the signing of the Agreement, US$500,000 following a successful visit by the DPR to Sirius’s operations and US$1 million within 5 days of the DPR’s final approval of the transfer to Sirius of the 40 percent interest in the Ke oil field. Sirius is entitled to recover these initial payments as part of the recovery of the funding costs of developing the Ke oil field. 

Ke Oil Field 

The Ke oil field was originally developed as a resource by Chevron Nigeria who retains a small royalty interest over any production income from the Ke Asset. The Ke Asset was awarded to indigenous Nigerian company Del Sigma in the DPR’s marginal field bid round of 2003. The Ke oil field is situated in swamp water in the southern part of the Niger Delta approximately 5 kilometers from the Gulf of Guinea. There are analogous fields throughout the basin, with production from Shell in the same OML 55, about 20 kilometers to the east of the Ke oil field. 

The Ke field was discovered in 1965, and the (2P) recoverable hydrocarbon reserve is estimated to be in excess of 18.7 million barrels of oil in the Ke-1 / Ke South area with an additional (2P) estimated reserve of in excess of 7.1 million barrels of oil in a separate fault in the KeNorth / Ke North-East area. As the Ke Asset has not yet been developed into production there are currently no profits attributable to it.

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