Sea Dragon Energy and Canadian company, Madison PetroGas have announced that they have entered into an arrangement agreement dated 18 August 2015 pursuant to which Sea Dragon will, subject to certain conditions, acquire all of the issued and outstanding Madison common shares by way of a statutory plan of arrangement under the Business Corporations Act. The combined entity is to be renamed "SDX Energy Inc.".
The transaction would create a larger company with stronger balance sheet and a greater ability to achieve economies of scale through operational efficiencies. The company would be poised for strong growth in oil production and reserves from development in its onshore core Egypt basins and high impact exploration in both Egypt and Cameroon.
Oil Production – Pro forma current oil production of 1565 boe/d (company working interest) and 2P reserves base of 5.1 MMboe (company working interest) from operated and non-operated assets in Egypt, which includes 2.2 MMboe of reserves at Meseda (100% oil) and approximately 2.9 MMboe of reserves at North West Gemsa (2.481 MMboe of oil and natural gas liquids and 0.487 MMboe of natural gas).
Near and Mid Term Production Growth – Average production target of 1810 boe/d (company working interest) for 2015 with an estimate 2015 exit rate of 1850 boe/d.
Impactful Exploration Program – The company expects to shoot 300sq km of 3D seismic at South Disouq, as well as continue to prepare for the first exploration well in the shallow water of Cameroon on the company's West Bakassi block. The company holds a 55% working interest at South Disouq and reasonably expects to produce natural gas and natural gas liquids and a 35% working interest in the West Bakassi block, where it reasonably expects to produce oil and natural gas.
Improved Financial Position – the combined company business plans are fully funded through 2016 with a pro forma working capital position of US$16.5 million as of closing and a solid cash flow profile.
"The combined entity will offer enhanced growth potential and we are excited by the possibilities. Size matters in our business and particularly in the current business environment,” said David Mitchell, CEO of Madison. “With similar Egypt portfolios and strategies, a business combination will improve our ability to transact and grow shareholder value. A London, UK base will also improve our operational efficiencies and place us in the premier business and capital markets center for the Middle East and Africa region."
Image: joint agreement/iStock