China - Dagang
On Wednesday November 21, 2012 Ivanhoe Energy announced that it has signed a Share Purchase and Sale Agreement with MIE Holdings Corporation (MIE) for all of the outstanding shares of Pan-China Resources Ltd., in exchange for a cash consideration of USD$45 million.
In this transaction, MIE will take over the contractor rights of the Dagang Production Sharing Contract, and a Gross Overriding Royalty on the Daqing Production Sharing Contract.
MIE is publicly traded on the Hong Kong Stock Exchange and specializes in oil and gas exploration, development and production. The Company is headquartered in Hong Kong and has operations in China, the United States and Kazakhstan.
The transaction has an effective date of September 30, 2012 and is subject to standard industry closing conditions, including but not limited to, a USD$5 million hold-back of the total consideration that is payable six months from the closing date and a termination fee of USD$1.25 million.
On Monday, December 17, 2012 Ivanhoe Energy announced that it closed the Share Purchase and Sale Agreement. The Company will receive the $45 million purhcase price, less adjustments. Per the terms of the Agreement, initial proceeds of approximately $36.5 million were delivered on closing and the Company will receive the remainder in six months.
Dagang is a conventional oil asset in China's sixth largest oil field, situated 100 kilometres southeast of the municipality of Tianjin in Hebei province.
The original contract, signed in 1997, had development and production rights over an area of 22,400 gross acres in six blocks and the company began drilling a five-well pilot program in 1998. A total of 44 development wells were drilled and completed.
The Dagang field reached cost recovery in September 2009, thereby reducing the company's working interest revenue from 82 percent to 49 percent. Pan-China is paid in U.S. dollars for its oil, based on international market prices.
In 2011 GLJ Petroleum Consultants reported that the property has 1.6 MMbbls proven and 2.5 MMbbls proven plus probable reserves. Current net production is 800-900 bbls/d in three blocks, Duannan, Xiaoji and Xixiepo, with a total area of 7,731 gross acres.
*Reserve estimates have been independently evaluated by GLJ Petroleum Consultants Ltd. at December 31, 2011