Pacific Energy To Acquire 34% Stake In Pre-Caspian Basin Asset

(RTTNews) - Pacific Energy Development (PED) Monday announced the entry into Kazakhstan through an agreement to acquire a near 34% indirect stake in Aral Petroleum Capital Ltd. Partnership.

Aral is a Kazakhstan entity which holds a 100% operated working stake in a production license covering the contract area issued by the Republic of Kazakhstan that expires in 2035 in western Kazakhstan, from Asia Sixth Energy Resources Ltd.. The contract area covers 380,000 acres within the North Block located in the Pre-Caspian Basin, which is the largest currently producing basin in Kazakhstan.

According to the company, the contract area is located in Aktobe Oblast in Western Kazakhstan, and includes the producing and developing areas of the East Zhagabulak field and the exploration areas of Baktygaryn, Itassai, Kodzhasy and West Kodzhasy fields.

In 2012, Aral produced about 11,385 tons of oil equivalent (TOE) (about 86,910 barrels of oil equivalent (BOE)) from 5 wells, and the asset is currently producing an average of approximately 383 BOE per day from 3 wells.

Aral is currently testing 2 wells on the asset, and plans to complete testing on a total of 4 wells in 2013. To date, Aral has spent approximately $134 million on exploration and development of the asset.

Under the agreement, the company plans to take control of Aral through acquisition of a 51% controlling interest in Asia Sixth by way of subscription of shares of Asia Sixth, which in turn currently holds a 60% controlling interest in Aral.

Asia Sixth's interest in Aral is scheduled to increase to 66.5% following the completion of certain transactions to occur between Asia Sixth and Asia Sixth's partner in Aral that currently holds the remaining 40% interest in Aral (the Aral Transactions).

Upon closing and completion of the Aral Transactions, Aral will be owned 66.5% by Asia Sixth, which will be controlled and managed by the company. Thus, the company, through its 51% majority ownership in Asia Sixth, will own an about 34% interest in Aral and have control of Aral through its control of Asia Sixth.

The company has paid an initial deposit of $8 million to Asia Sixth, and shall increase its initial deposit by up to $12 million to a total of $20 million contingent upon receipt of payment in full to the Company from certain investors under promissory notes maturing in September 2013 and December 2013.

The deposit is subject to full refund to the Company in the event the transaction does not close, other than as a result of the Company's material uncured breach. This money will also be used, in part, to recomplete and rework currently producing wells with the hope of significantly increasing their production rates.

Based on how these wells perform, at closing, the company shall owe to Asia Sixth a final closing payment equal to an additional: (i) $20 million if the daily average volume of oil produced by Aral over a specified 30 day period (the Target Volume) equals or exceeds 1,500 barrels of oil per day (BOPD); (ii) $15 million if the Target Volume equals or exceeds 1,000 BOPD but is less than 1,500 BOPD; or (iii) $0 due if the Target Volume comes in less than 1,000 BOPD.

The closing of the transaction is anticipated to occur in September 2014, subject to the satisfaction of certain customary closing conditions.