Monday, July 11, 2016
Cub Energy to develop western Ukraine gas field with Slovakian company
Cub Energy Inc. announces that it has entered into a share purchase agreement (“SPA”) and Shareholders’ Agreement (“SHA”) with NAFTA INTERNATIONAL B.V. (“NAFTA”), whereby NAFTA earns a 50% interest in the Company’s newly formed subsidiary, CNG Holdings Netherlands B.V. (“CNG”), which, in turn, owns CNG LLC (Ukraine LLC), 100% owner of the Uzhgorod production licence in western Ukraine. Pursuant to the terms of the SPA, NAFTA is to:
Pay Cub €1.5 million (US $1.7 million) upon transfer of the 50% shares (“Closing”). The Closing occurred earlier today and the transfer of funds is expected to be completed by Monday, July 11, 2016;
Fund a 100 square kilometre 3D seismic survey within 20 months of Closing;
Fund the drilling of first three wells within four years of Closing;
Fund the tie-in costs of the first three wells up to a maximum €0.2 million (US $0.2 million) per well within four years of Closing.
Mikhail Afendikov, Cub’s Chief Executive Officer, said, “We look forward to our new partnership with NAFTA and will leverage their oil and gas experience on the adjoining Slovakian field with our experience in the nearby producing Rusko-Komarivske (“RK”) field in western Ukraine. Together we plan to continue the exploration and development of the Uzhgorod licence. We hope to commence the 3D survey later in 2016.”
This is some good news in that Cub did not have the cash to develop the field on its own. We need the company to get its projects moving forward into development if we want to see a higher share price. it would be my preference to do all this in house and keep all the benefits but it is just no realistic due to funding requirements.
Another potential issue is the timeline; up to 20 months to complete the 3D seismic and drilling of three wells within four years. However, they could also begin sooner I guess. Nevertheless, management is getting a program started which is a net positive