Introduction to the Mime Petroleum Acquisition
Last 19th April, Kistos acquired Mime Petroleum, a Norwegian-based oil company which was under financial stress due to the delays of its main project (Balder Future project) and the delayed production from Ringhorne wells. Its main equity holder (Bluewater – a Private Equity firm), decided after injecting $134MM in the project in the last years, to disinvest from some O&G assets and Mime, due to all the delays and the needed to inject more equity was put on sale.
Considering the equity situation (having to provide capital that their main shareholder says they won’t contribute), it is now clear that the bondholders are the ones holding the power since the situation requires restructuring (Mime was breaching covenants in March due to lack of funds). It is evident that the negotiation has been complex, which is why it has taken over a year. However, at this point, A. Austin negotiated with the bondholders and reached an agreement to acquire Mime (the transaction structure is explained later).
Obviously, Mime’s bonds were trading at a significant discount (a portion of them would have been converted to equity under conditions in which Bluewater’s equity would have been completely diluted).
Mime Petroleum Assets
Mime Petroleum is a Norwegian company that has non-controlling interests in the Balder joint venture (comprising the Balder and Ringhorne fields – 10% interest) and a 7.4% stake in the Ringhorne East unit, all operated by Var Energi A.S.A. The acquisition will add 24 MMboe of 2P reserves (operator estimate) plus 30 MMboe of 2C
Currently, it is producing around 2000boe/d from Ringhorne, and this will increase considerably once the Balder X project is on stream (expected COD in 4Q24).
The problem for Mime has been that the Balder X project requires the construction of an FPSO, which has experienced significant delays, as well as the drillings of Ringhorne. (Balder X comprises the Balder Future and Ringhorne Phase IV drilling projects and is designed to extend the life of the Balder Hub)
The Opex for these assets is estimated at around $26 per barrel, although we have been a bit more conservative. In addition, a drilling campaign is being carried out in Ringhorne (which, as we have mentioned, is experiencing significant delays). Phase 3 included 3 workovers and 7 new wells, and Phase 4, which should start in 2Q23, includes 5 new wells. These drillings are expected to increase Mime’s production by 2000 bbls and to be connected before the Jotun FPSO starts producing at the end of 2024. Although the company’s latest comments (before being acquired by Kistos) indicated that this might be extended until 2025, we understand this was due to a lack of funds and Kistos solves this problem.
