/THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION,
DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, JAPAN OR
ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL. THIS ANNOUNCEMENT
IS NOT AN OFFER OF SECURITIES IN THE UNITED STATES, AUSTRALIA, JAPAN OR
ANY OTHER JURISDICTION./
TSX TRADING SYMBOL: ABG
JERSEY, Channel Islands, June 26 /CNW/ - Arawak Energy Limited ("Arawak"
or the "Company" and together with its subsidiaries and affiliates, the
"Group") (TSX: ABG) is pleased to announce today its intention to apply for
the admission to listing of the common shares of Arawak (the "Common Shares")
on the Official List of the United Kingdom Listing Authority and to trading on
the Main Market of the London Stock Exchange plc (the "LSE") (collectively,
"Admission"). Arawak intends to maintain the listing of its Common Shares on
the Toronto Stock Exchange (the "TSX").
JPMorgan Cazenove Limited ("JPMorgan Cazenove") has been appointed as
Sponsor in connection with Admission.
Information on Arawak
Arawak is a multi-asset oil and gas production, development and
exploration group which has been active in the Former Soviet Union (the "FSU")
since 1998 and has current operations in Kazakhstan, Russia and Azerbaijan.
The Company's intention is to become the leading independent oil and gas
company focused on the FSU and to grow both organically and through
acquisition. Arawak's directors (the "Directors") and the proposed directors
(being Charles Carter, Shahveer Kapadia and Michael Volcko, together the
"Proposed Directors") believe that these countries will be important drivers
for an increase in non-OPEC oil and gas supplies during the next decade.
Arawak's geographic focus offers a cohesive operating niche and the shared oil
and gas industry heritage of the countries in which it operates has positive
operational implications, such as easily transferable skills and knowledge.
Production in the first quarter of 2008 averaged 11,774 barrels of oil per day
("bopd") from Russia and Kazakhstan, with an additional 174 barrels of oil
equivalent per day ("boepd") of gas from Azerbaijan. Arawak's total production
capacity currently stands at around 14,500 bopd including production capacity
from Arawak's interest in the Saigak field, the acquisition of which was
completed on 9 June 2008 and actual production currently stands at around
Commenting on today's announcement, Alastair McBain, President and Chief
Executive Officer of Arawak said:
"Arawak has achieved significant success over the last decade in
developing a well-balanced portfolio of exploration and production assets in
Kazakhstan, Russia and Azerbaijan. A London Main Market listing will help to
broaden our investor base and enable Arawak to pursue its strategic aim of
becoming the leading independent oil and gas company focussed on the FSU.
Kazakhstan, Russia and Azerbaijan account for over 41.8 per cent. of the
world's proved oil reserves outside OPEC. Arawak is therefore extremely well
placed to take advantage of the role the FSU will play in meeting the world's
future energy demands. Our management team's extensive regional knowledge and
established relationships will enable us to develop further our existing
assets and to identify appropriate acquisition opportunities. As well as
raising Arawak's profile amongst European investors, we also believe that a
London listing is appropriate given the geography of our operations."
- In Kazakhstan, the Company owns 100 per cent. interests in and is
operator of four oil producing or trial producing blocks and two
exploration blocks, together with a 40 per cent. interest in the
recently acquired Saigak field. In Russia, the Group is operator of
and 50 per cent. shareholder in two oil producing blocks and also
owns 100 per cent. of an appraisal block and an exploration block. In
Azerbaijan, the Group owns a 29.7 per cent. interest in the
Exploration, Development and Production Sharing Agreement ("EDPSA")
for the South West Gobustan oil and gas fields.
- Arawak's major shareholder is the Vitol Group ("Vitol") which
currently holds 41.5 per cent. of the Common Shares of Arawak. Vitol
is an independent, privately-owned oil trading company, with its core
business in energy, particularly crude oil and oil products. Vitol is
the sole off-taker for Arawak's export volumes in Kazakhstan and
Russia. The Company and Vitol have entered into a relationship
agreement dated 26 June 2008 (the "Relationship Agreement") to ensure
Arawak continues to operate its business independently of Vitol after
- On 9 June 2008, the Company completed the acquisition of Saigak
Investments B.V., a company which has a 40 per cent. participating
interest in the Saigak Block ("Saigak") in Kazakhstan. The Company
issued Vitol with 8,352,587 Common Shares, in relation to the
acquisition, which resulted in Vitol's shareholding in the Company
increasing from 38.7 per cent. to 41.5 per cent. Saigak averaged
gross oil production of 2,890 bopd in 2007.
- As at 31 December 2007, the proved plus probable plus possible
reserves of the Group in Kazakhstan were 54.5 million barrels of oil
("bbls") (including Saigak as at 31 December 2007) as evaluated by
McDaniel & Associates, 13.3 million bbls in Russia as evaluated by
Ryder Scott Petroleum Consultants ("Ryder Scott") and 22.3 million
barrels of oil equivalent ("boe") in Azerbaijan as evaluated by
- The Company has a sound financial position due to its strong
operating cash flow and the profitable nature of its business.
- The Company was listed on the TSX Venture Exchange in 1994 and since
November 2006 has been listed on the TSX. The Directors believe that
Admission will raise the Company's profile and status amongst
European investors and will give the Company improved access to
international capital markets. Furthermore, the Directors believe
that Admission should in due course improve financing options and
increase the trading and liquidity of the Common Shares, and thereby
assist Arawak in reaching its strategic goals.
Conditional on Admission, Charles Carter (Chief Financial Officer),
Shahveer Kapadia (Chief Operating Officer) and Michael Volcko (Vice President
Business Development) will join the Arawak board. In addition to the three new
executive directors named above, following Admission, the board will consist
of James Coleman (Non-executive Chairman), Alastair McBain (Chief Executive
Officer and President), Phillip de Boos-Smith (Non-executive Director),
Ross Douglas (Non-executive Director), Nicholas Clayton (Senior Independent
Director), Malcolm Hope-Ross (Non-executive Director) and Alan Duncan M.P.
Arawak is a successful oil and gas producer with exploration, development
and production in the FSU. The management team has significant FSU experience
and a strong locally based operating capability. In addition, Arawak operates
the majority of its multi-asset portfolio. The Directors and the Proposed
Directors believe there are significant growth opportunities both through
existing exploration and development prospects and through acquisitions. They
also believe that Arawak has a number of key strengths and competitive
advantages that are important to the continued success of the business
including the following:
- Cash generative portfolio of assets
The Company's existing portfolio is cash generative and the business is
profitable. The Company's producing assets have drilling programmes in place
to achieve Arawak's targeted near-term increase in production. Additionally
the Directors and the Proposed Directors believe that there is a good prospect
of significant increases in Arawak's proved and probable reserves in each of
the three territories in which the Company operates. Ongoing interpretation of
existing 2D and 3D seismic data, together with additional seismic studies
planned for 2008 and 2009, will further delineate the prospectivity of
Arawak's appraisal and exploration portfolio.
- Strong track record of increasing production
The Company has been active in the FSU since 1998 and has a strong track
record of bringing development assets into production. Arawak's total
production currently stands at around 12,750 bopd with total production having
risen at an average annual rate of 35 per cent. between 2005 and 2007. In
2007, Arawak successfully completed an aggressive drilling programme of 46 new
wells, achieving a drilling success rate of over 75 per cent.
The Directors and the Proposed Directors believe that Arawak has
significant operational expertise. Below board level, the Group has a strong
technical team, the majority of whom are located in Arawak's operational
countries of Kazakhstan and Russia in close proximity to the assets. The
Directors and the Proposed Directors believe this local presence provides a
number of advantages, including the development of an in-depth knowledge and
understanding of the local markets and the ability to identify, evaluate and
exploit opportunities at a local level. Some members of the Russian
operational team have been operating the Group's assets for over ten years.
- Strong track record of identifying, completing and integrating
The Company has made nine acquisitions since 2003 demonstrating its
ability both to identify opportunities and to deliver transactions. The
acquisition of RF Energy Investments Ltd ("RFE") from Vitol and the
acquisition of Altius in January 2005 transformed the Company from a single
asset play in Azerbaijan to a multi-asset play across Kazakhstan, Russia and
Azerbaijan. Arawak has subsequently acquired a further seven assets, some of
which are producing assets with exploration prospects, which offer significant
potential both for exploration and for near-term production growth. The
Company has successfully and quickly integrated each of the acquisitions it
has made into its portfolio.
- Regional focus
Arawak focuses on three high potential non-OPEC countries in the FSU:
Kazakhstan, Russia and Azerbaijan. The Directors and the Proposed Directors
believe that these countries will be important drivers for an increase in
non-OPEC oil and gas supplies during the next decade. Arawak's geographic
focus offers a cohesive operating niche and the shared oil and gas industry
heritage of the countries in which it operates has positive operational
implications, such as easily transferable skills and knowledge. It also
enables the use of local equipment and services whilst employing western
technology where appropriate.
- Experienced senior management team
The Company's experienced senior management team have worked extensively
in international oil and gas projects in the FSU and other developed and
developing countries. Furthermore, the senior management team is supported by
a strong independent board comprising a majority of Non-executive Directors
with in-depth knowledge of the international oil and gas industry.
- Multi-asset producing portfolio
The Company has a multi-asset portfolio balanced between production,
development and exploration assets in three countries within the FSU. Arawak
operates the majority of its assets and hence is able to control their
In Kazakhstan, Arawak is currently producing or conducting trial
production of oil from five blocks and has two exploration blocks. In Russia,
the Group is operator and 50 per cent. shareholder in two oil producing blocks
and also owns 100 per cent. interests in an exploration block and an appraisal
block. In Azerbaijan, Arawak has a net 29.7 per cent. interest in the South
West Gobustan field, which has commenced pilot production of oil and gas.
There are major infrastructure projects under way in Russia and Kazakhstan.
All Russian production is subject to taxation which has over recent years
been largely related to world oil pricing, resulting in a margin largely
insulated from the price of oil. In Kazakhstan, nearly all of Arawak's current
production is from older tax stabilised contracts or Production Sharing
Agreements ("PSAs") where the margin generated is strongly dependent on the
price of oil. In Azerbaijan, Arawak is also operating under PSA terms. As a
result, Arawak's vulnerability to a major fall in world oil prices is in part
mitigated by the stability of the margin in Russia.
- Growth potential
The Directors and the Proposed Directors expect Arawak's growth in future
potential and actual production to be driven both by exploration and appraisal
activity on its contract areas in all countries in which it is currently
active, and by acquisitions.
In Kazakhstan, approximately 100 sq km of 3D seismic surveys were carried
out on the Akzhar and Besbolek blocks in 2006 and 2007 resulting in the
identification of numerous drilling locations, most of which have now been
drilled up and have already resulted in an 83 per cent. increase in proved
reserves during 2007 (after allowing for 2007 production). As these blocks
move from the current exploration phase to the production phase, during the
current year, full appraisal and development drilling will be permitted. The
Directors and the Proposed Directors believe that this should allow the
Company to demonstrate the full productive capacity of the multi-layered oil
potential of these blocks. Such a demonstration of productive capacity would
lead to the recognition of higher recovery factors and therefore higher proved
In 2008, the Company plans to carry out 2D and 3D seismic surveys on the
East Zharkamys III, Alimbai and Tamdykol blocks in Kazakhstan which will give
the Company greater knowledge of the potential of these blocks and identify
exploration drilling locations. Also, the Company expects to drill exploration
wells on these blocks in 2008 and 2009. Proved and probable reserves of these
blocks as of 31 December 2007 were less than a million barrels.
In Russia, during the winter of 2007/2008, seismic surveys of
approximately 100 sq km of the North Irael block and the South Sotchemyu block
were carried out. Additional 2D seismic surveys will be undertaken on South
Sotchemyu in 2008/2009 and seismic work is planned for the Kymbozhyuskaya
block. This work will result in a more detailed delineation of the future
exploration potential for all these under-developed blocks. While Arawak's
share of proved reserves on North Irael stood at 1.8 million bbls at the end
of 2007, no proved or probable reserves have been attributed to South
Sotchemyu or Kymbozhyuskaya.
In Kazakhstan and Russia, the Company has assessed the current unrisked
prospective resource potential of its exploration and appraisal inventory at
760 million bbls. Risked prospective resources stand at 145 million bbls,
according to Company estimates effective 31 May 2008. There is no certainty
than any portion of the resources ascribed to the South Sotchemyu block will
be discovered. If discovered there is no certainty that it will be
commercially viable to produce any portion of the resources.
In Azerbaijan, where the Company holds a minority non-operating interest
in the South West Gobustan EDPSA area, 245 sq km of 3D seismic and 407 km of
2D seismic surveys are in the process of being independently processed and
interpreted by Arawak's technical team. The interpreted seismic data will help
further define the potential of these areas, particularly the Northern and
Central blocks to which currently less than six per cent. of the total proved
and probable reserves are currently attributed to Arawak in Azerbaijan.
According to the June 2008 BP Statistical Review of World Energy,
Kazakhstan, Russia, and Azerbaijan account for over 41.8 per cent. of the
world's proved oil reserves outside of OPEC, and offer among the largest
opportunities for production growth. Arawak has consistently enlarged the
scope of its business in these countries through acquisitions of other
companies or assets and expansion of areas under contract, and intends to
continue to develop its business in this manner. Acquisitions are expected to
form an important aspect of Arawak's future production growth.
- Relationship with Vitol
Arawak's major shareholder is Vitol, which currently holds 41.5 per cent.
of the Common Shares in Arawak. Vitol is an independent, privately-owned
trading company, with its core business in energy, particularly crude oil and
oil products. Vitol has extensive relationships in the worldwide oil and gas
industry and has been working in the FSU since 1983.
Historically, Arawak has benefited from its relationship with Vitol
including acquiring the interests that Vitol held in RFE and Altius in January
2005. In November 2007, Arawak signed an agreement to acquire Saigak
Investments from Vitol. The transaction completed on 9 June 2008. Arawak
benefits from the relationship through the introduction of opportunities for
acquisitions and expansion.
Vitol is the sole off-taker for the Company's export volumes in
Kazakhstan and Russia, responsible for approximately 79 per cent. of Arawak's
revenue in 2007. Historically Vitol has also participated in equity
fundraisings and debt financings and sold assets to Arawak. The Company and
Vitol have entered into a Relationship Agreement to ensure Arawak continues to
carry on its business independently of Vitol and that transactions and
relationships with Vitol are at arm's length and on normal commercial terms.
The Company is seeking to become the leading independent oil and gas
company focussed on the FSU. The Directors and the Proposed Directors believe
that the Company is well positioned to leverage its regional knowledge and
relationships to take advantage of new opportunities and to fully develop its
existing ones. The Company's current portfolio provides exposure to a balance
of production, development, appraisal and exploration assets. Arawak's
intention is to maintain the balance within its portfolio.
The Company intends to deliver growth to investors both organically, by
increasing production from its existing oil and gas assets, and through the
acquisition of carefully selected assets. The Company intends to use its
in-depth knowledge and understanding of the FSU to seek available
opportunities for expansion both through the award of new contracts and
licences and corporate acquisitions. The Directors and the Proposed Directors
believe that the Company is well positioned through its geological and
geophysical evaluation capabilities and the expertise base of its Russian and
Canadian technical teams to evaluate the potential of oil and gas
opportunities in the FSU and elsewhere. Opportunities exist in locations close
or even adjacent to current Group production as demonstrated by the 2006
acquisition of North Irael, through the 2006 purchase of Recher, and the 2007
acquisition of South Sotchemyu in Russia. In addition, particularly when oil
prices are high, such judicious exploration is believed by the Directors and
the Proposed Directors to be a good way of expanding production.
The Company has maintained its principal staff centres in regional cities
close to areas of existing operations in order to reduce communication
distances and maximise control. The Directors and the Proposed Directors
believe that strict compliance with all local and regional laws and
regulations is an essential ingredient of success in the FSU and will continue
to focus on this.
While the Company may consider forming strategic partnerships or
alliances to facilitate growth, operating its own assets and consequent
control of costs will be an important consideration in its future acquisition
policy. The Company also has a non-operated position in Azerbaijan, where it
has a minority share of 29.7 per cent. and China National Petroleum
Corporation is the operator. In future, the Directors and the Proposed
Directors may seek to rationalise the portfolio of assets, focussing on large
Company-operated producing units and spreading exploration risks wider through
alliances. In addition, the Company may seek to spread the scope of its
activities to include other countries while maintaining its main focus on the
Current Trading and Prospects
Crude oil production from the Company's assets in Kazakhstan and Russia
in the first quarter of 2008 averaged 11,774 bopd, with an additional
174 boepd of gas in Azerbaijan. So far in the second quarter of 2008
production has shown an increase from this level to around 12,750 bopd,
including production from Arawak's interest in the Saigak field, the
acquisition of which was completed on 9 June 2008. Further production growth
is expected from the Company's existing producing assets in Kazakhstan and
Russia during the course of 2008, while the currently limited production in
Azerbaijan may decline or be temporarily shut-in for operational reasons.
Sales continue to be very strong in both volume and price terms for domestic
and export barrels.
High international oil prices continue to have a beneficial effect on the
Company's financial results. While netbacks in Russia are largely insulated
from movements in world oil prices, netbacks in Kazakhstan are currently much
more sensitive to world oil prices. Net income in the first quarter of 2008
was US$8.5 million as a result of increasing production and higher world oil
prices, despite local currency cost inflation, a weak US Dollar and much of
the Company's production in Kazakhstan being subject to the higher "Excess
Profit Tax" regime. The construction of pipeline infrastructure in both
Kazakhstan and Russia in 2008/2009 is expected to result in lower operating
costs and increased netbacks per barrel.
The recently-announced introduction in Kazakhstan of a Customs Export
Duty to some or all oil producers in the country is likely to result in lower
export netbacks and may reduce the sensitivity to changes in world oil prices.
The Company's exploration assets in all three countries of operation
offer the prospect of increased reserves and production in the longer term.
A prospectus prepared pursuant to the Prospectus Directive will be
published shortly and when published, will be available from the offices of
Denton Wilde Sapte LLP at One Fleet Place, London EC4M 7WS. Application will
be made to the Financial Services Authority for all of the Common Shares to be
admitted to listing on the Official List and to the LSE for such Common Shares
to be admitted to trading on the LSE's main market for listed securities. It
is expected that Admission will become effective and dealings will commence in
the Common Shares at 8.00 a.m. on 1 July 2008.
Following Admission the Company intends to appoint JPMorgan Cazenove and
Oriel Securities as joint brokers to the Company.
For further information please contact:
Arawak Energy Limited
Alastair D. McBain, President & Chief Executive Officer
Charles R. A. Carter, Chief Financial Officer
Phone: +44 (0) 20 7973 4285
Fax: +44 (0) 20 7824 8466
Brunswick Group LLP, PR Advisers to Arawak
Patrick Handley Tel: +44 (0) 20 7404 5959
JPMorgan Cazenove, Sponsor
James Taylor Tel: +44 (0) 20 7588 2828
This announcement has been prepared and issued by Arawak and is the sole
responsibility of Arawak, and its contents have been approved solely for the
purposes of Section 21(2)(b) of the Financial Services and Markets Act 2000
(the "FSMA") by JPMorgan Cazenove of 20 Moorgate, London EC2R 6DA.
JPMorgan Cazenove, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for Arawak
and for no-one else in connection with Admission and will not be responsible
to anyone other than Arawak for providing the protections afforded to its
customers or for providing advice in relation to Admission or any arrangement
referred to herein.
The distribution of this announcement and other information in connection
with Admission may be restricted by law in certain jurisdictions and persons
into whose possession any document or other information referred to herein
comes should inform themselves about and observe any such restrictions. Any
failure to comply with these restrictions may constitute a violation of the
securities laws of any such jurisdictions.
This announcement is not an offer to sell, or a solicitation of an offer
to buy, securities in the United States. The securities referred to herein
have not been and will not be registered under the U.S. Securities Act of
1933, as amended (the "Securities Act") and may not be offered, sold or
otherwise transferred in the United States (as such term is defined in
Regulation S under the Securities Act) unless they are registered under the
Securities Act or pursuant to an available exemption therefrom. No public
offering of securities is being made in the United States or elsewhere.
The price and value of the Common Shares may go down as well as up.
Potential investors needing advice should consult a professional adviser.
This announcement is not a prospectus for the purposes of applicable
measures implementing the Prospectus Directive. A prospectus prepared pursuant
to the Prospectus Directive will be published shortly and when published, will
be available from the offices of Denton Wilde Sapte LLP at One Fleet Place,
London EC4M 7WS.
Note on Forward-Looking Information
Information contained in this announcement may contain "forward-looking
statements". All statements other than statements of historical fact included
herein are forward-looking statements.
All forward-looking statements involve risks and uncertainties because
they relate to events and depend on circumstances that may or may not occur in
the future. Undue reliance should not be placed on such forward-looking
statements because they involve known and unknown risks, uncertainties and
other factors that are in many cases beyond Arawak's control.
These risks and uncertainties include, but are not limited to, risks
associated with the oil and gas industry (including operational risks in
development, exploration and production; delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of reserve estimates; the uncertainty of estimates and projections
in relation to production, costs and expenses and health, safety and
environmental risks), the risk of commodity price and foreign exchange rate
fluctuations, the uncertainty associated with commercial negotiations and
negotiating with foreign governments and risks associated with international
activity. Although Arawak believes that its expectations represented by these
forward-looking statements are reasonable, there can be no assurance that such
expectations will prove to be correct. Additionally, the estimates of reserves
and future net revenue for individual properties may not reflect the same
confidence level as estimates of reserves and future net revenue for all
properties, due to the effects of aggregation. A barrel of oil equivalent
(boe), derived by converting gas to oil in the ratio of six thousand cubic
feet of gas to one barrel of oil, may be misleading, particularly if used in
isolation. A boe conversion is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Possible reserves are those additional reserves
that are less certain to be recovered than the probable reserves. There is a
10 per cent. probability that the quantities actually recovered will equal or
exceed the sum of proved plus probable plus possible reserves.
Such forward-looking statements reflect Arawak's current view with
respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to Arawak's operations, results of
operations, financial performance, business strategy and liquidity.
These forward-looking statements speak only as of the date of this
announcement and cannot be relied upon as a guide to future performance.
Arawak expressly disclaims any obligation or undertaking to update, review or
revise any forward-looking statement contained in this announcement whether as
a result of new information, future developments or otherwise, or to
disseminate any information regarding any change in events, conditions or
circumstances on which any statement is based. Due to the risks, uncertainties
and assumptions inherent in forward-looking statements, prospective investors
in the Company's securities should not place undue reliance on these
forward-looking statements. For a detailed description of the risks and
uncertainties facing Arawak, readers should refer to Arawak's Annual
Information Form as filed at www.sedar.com.
Potential investors should also consider all the information, and in
particular the risk factors, set out in the prospectus intended to be
published by the Company in connection with Admission.
For further information:
For further information: Arawak Energy Limited, Alastair D. McBain,
President & Chief Executive Officer, Charles R. A. Carter, Chief Financial
Officer, Phone: +44 (0) 20 7973 4285, Fax: +44 (0) 20 7824 8466, E-mail:
email@example.com, Web: www.arawakenergy.com; Brunswick Group LLP, PR
Advisers to Arawak, Patrick Handley, Tel: +44 (0) 20 7404 5959; JPMorgan
Cazenove, Sponsor, James Taylor, Steve Baldwin, Tel: +44 (0) 20 7588 2828