JOHANNESBURG (miningweekly.com) – Independent African upstream oil and gas company SacOil has inked a deal to acquire Cyprus-based exploration and production company Mena International Petroleum (MIP) from Mena International Petroleum Holdings (Mena) – a wholly-owned subsidiary of Toronto-listed Mena Hydrocarbons.

Tha acquisition would see SacOil fully securing MIP’s 100% interest in the development lease for the Lagia oilfield, covering an area of some 32 km2 on the Sinai Peninsula, in Egypt.

Through the deal, Mena would receive $10-million in SacOil shares through the issuance of 183.6-million ordinary shares.

In addition, SacOil would settle, in cash, all MIP's liabilities, to a maximum value of $4.1-million. This cash consideration would include $1.8-million owing to the holders of various promissory notes.

Sacoil said on Monday that the Lagia oilfield represented a derisked onshore development asset in Egypt with short timelines to production and cash flows.

It boasted proven and probable reserves of 6.17-million bbls of oil and represented a strategic entry into Egypt, where SacOil saw the potential to build a substantial exploration and production business.

Currently at development stage, Lagia offered heavy oil in shallow reservoirs and light oil potential in deeper reservoirs, with assets including existing production facilities and oil storage for 3 000 barrels of oil.

The field was currently in test production and SacOil intended to implement a phased development programme to bring the field into full production.

Phase 1 would include the hydraulic stimulation of four existing wells and the work-over of one well, starting as soon as practicable after closing the acquisition, which would be funded from existing cash resources.

SacOil said the deal aligned with the oil and gas group’s strategy of growing and balancing its existing portfolio in Africa through the addition of reserves and production to its asset base.

The two-pronged approach of this strategy included the monetisation of existing assets and expansion of the portfolio to deliver production and cash flows.

SacOil CEO Dr Thabo Kgogo said the signing of the deal endorsed the group’s short- to medium-term strategy of balancing its existing exploration and appraisal portfolio with lower-risk production and development assets.

“We welcome our new shareholders and this opportunity to expand into a new geographical location, which continues our strategy of building a substantial Pan-African company.

“Moreover, this acquisition represents the first booked reserves for the company and, through our development programme, we will be targeting a daily production rate from the Lagia oilfield of more than 1 000 bbl/d of oil by the fourth quarter of 2015,” he noted.

Following completion of the acquisition, which was expected by October 31, SacOil would provide further updates on its planned future development activities and investments in the Lagia oilfield.