KUALA LUMPUR: Dagang NeXchange Bhd's (DNeX) unit Ping Petroleum UK Ltd is buying the remaining 50 per cent stake in the UK offshore Avalon Oilfield from Sumitomo Corp for US$17 million.
The deal is said to stem from Sumitomo's intention to shift away from the fossil fuel business and DNeX's decision to avoid any potential conflicts should the 50 per cent be sold to a third party.
The Avalon Oilfield, which was initially discovered in May 2014 and further appraised in July 2017, lies entirely in the United Kingdom block 21/6b of the North Sea, 120 kilometres northeast of Aberdeen in 120 metres water depth.
The oilfield was initially owned by Sumitomo and Ping UK had on April 7, 2017 entered into an agreement with the former to buy a 50 per cent working interest in the field.
In its filing with Bursa Malaysia today, DNeX said Ping UK had entered into a sale and purchase agreement with Sumitomo's wholly-owned Summit Exploration and Production Ltd for the acquisition.
"As the joint-owner and operator of the Avalon Oilfield, the proposed acquisition would allow Ping UK to avoid any potential conflicting decisions which may arise should Sumitomo sell its 50 per cent interest to a third party," it said.
DNeX said the development of the Avalon Oilfield was expected to result in a significant increase in oil production and reserves for Ping UK.
"This will also provide significant portfolio risk mitigation as Ping UK's revenues would be realised from two independent installations namely from the Anasuria cluster and the Avalon Oilfield after the first production from the Avalon Oilfield.
"Further, the Avalon Oilfield is a proven discovery with significant upside in a politically stable region," it said.
DNeX said Ping UK planned to begin work on the front end engineering and design (FEED) for the selected development concept while sourcing for long-lead items and materials for drilling and development activity.
Following approval of the Field Development Plan (FDP) which is expected by the second quarter (Q2) 2022, Ping UK plans to commence drilling of development wells on Avalon in Q3 2022 while installation and hook-up of the production facility is planned one year later in Q2 2023.
"Based on the current estimates, Avalon Oilfield is expected to begin producing oil by July 2023," it said.
The proposed acquisition is expected to be completed in Q3 2021.