Petroleum development company Warrego Energy (ASX: WGO) is set to acquire a minimum 50.1% indirect interest in the El Romeral integrated gas production and power station operation located in the Guadalquivir basin in southern Spain.
The acquisition from Petroleum Oil and Gas España SA will be completed by the Tarba Energia SL joint venture, shared by Warrego (85% equity) and UK-based Prospex Oil and Gas Plc (15%).
Warrego and Prospex have entered into an agreement whereby Warrego will fund the initial $1.2 million consideration, and Prospex will have 90 days to elect to take up to 49.9% of the asset.
Further deferred consideration of approximately $1.2 million will be due to Petroleum on the drilling of three new wells, at a payment of $405,000 per well.
Warrego and Prospex also have a combined interest in the Tesorillo gas project in Spain’s Cadiz Province and believe El Romeral will be “highly complementary” to exploration efforts in the region.
Tesorillo contains a known gas discovery and is believed to hold gross unrisked prospective resources of 830 billion cubic feet of gas, with significant upside of more than 2 trillion cubic feet.
El Romeral comprises three production licences over 310 square kilometres and an 8.1 megawatt power station supplied by three producing wells.
The licences were awarded in 1994 and are valid until 2024, with an option to extend for two 10-year periods.
The asset package also includes 13 prospects and multiple low-cost development opportunities with potential to increase gas production, electricity generation and revenue.
The 13 prospects have gross contingent and unrisked prospective gas resources of 5 billion cubic feet and 90 billion cubic feet respectively.
Modern exploration over the El Romeral area by Chevron and Repsol has led to seven gas discoveries, five of which have been deemed commercial and put on production.
Warrego said El Romeral has a “low cost and rapid route to commercialisation” via tie-ins to the power station over the next 24 months.
Planning for the tie-ins will commence in 2020.
At mid-afternoon, shares in Warrego were steady at $0.195.