Transeuro Energy Corp. (“Transeuro”, or the “Company”) announces it has entered into a Joint Venture Agreement (“JVA”) with RAG Rohöl-Aufsuchungs Aktiengesellschaft (“RAG”) to develop Transeuro’s existing Ukrainian assets and Joint Activity Agreements with the local Ukrainian state company “Crimgeologiya”. The new Joint Venture will also pursue additional business opportunities in Crimea.
RAG (www.rohoel.at) is a non listed Austrian stock company owned by major Austrian and German energy and utility companies, principally EVN, a leading Austrian energy, water and infrastructure company (Vienna exchange symbol EVN) and E.ON Ruhrgas AG, a major European integrated gas company (Frankfurt exchange symbol EOA.DE). RAG, established in 1935, is the oldest E&P company in Austria, and operates 51 gas fields and 40 oil fields including substantial gas storage facilities. Annual gas sales volumes are around 1.1 billion m3, with over 3 billion m3 of operational and projected working gas storage.
Transeuro and RAG will be 50:50 partners in the new joint venture. The JVA outlines substantial tangible benefits to Transeuro including direct payments to Transeuro for past drilling costs, seismic costs and inventory. And under various firm and conditional funding formulas, RAG will provide its 50% investment share and contribute up to an additional 25% of the drilling of three wells and the 3D seismic over two fields (making RAG total contribution up to 75% of well and seismic costs). In addition RAG will contribute to an agreed fund for the acquisition of new licenses in Crimea and for field development. The potential contribution by RAG to the total capital budget for 2008 and 2009 is up to US$70 million with Transeuro responsible for its remaining share of well and seismic costs. Following success of the Karlavksoye101 and Povotonoye 104 wells both RAG and Transeuro each envisage investing around US$ 280 million into these two Crimea fields.
Both Transeuro Energy and RAG believe there is a considerable business opportunity in Ukraine from the Joint Activity Agreements held with Crimgeologiya and that there is an opportunity for further growth through the acquisition of additional discovered non producing fields. The business environment in Ukraine and the domestic gas price has strengthened considerably over the past two years and the government has raised the emphasis on supporting domestic exploration and production.
Under the terms of the JVA, Transeuro will reorganize all of its existing Ukrainian assets such that they will all be held indirectly by a wholly owned Dutch subsidiary of Transeuro. At the closing of the transaction contemplated by the JVA, Transeuro will transfer 50% of the shares of its Dutch subsidiary to RAG.
There are a number of conditions precedent to the closing of the transaction contemplated by the JVA including, among other things, the entering into by the parties of a Joint Management Agreement, the approval of the Antimonopoly Committee of Ukraine and the completion of the corporate restructuring of Transeuro and its Ukrainian assets. The parties anticipate closing the transaction within 60 days.
Hal Hemmerich, President and Chief Executive Officer of Transeuro commented, "We look forward to working with RAG to further the development of our projects in Ukraine. RAG has considerable expertise in exploration & production, gas marketing, distribution and storage that will be of great benefit to the partnership. Together with RAG being a financially strong company we can look at more projects”
Markus Mitteregger, Managing Director of RAG said, “The joint activity with Transeuro in Ukraine is a further important step in our international growth strategy. Ukraine is a country of prime importance in the European energy context and we look forward to develop resources for the Ukrainian market”.
Transeuro Energy Corp. is involved in the acquisition of petroleum and natural gas rights, the exploration for, and development and production of crude oil, condensate and natural gas. The Company's properties are located in Canada, Armenia, Ukraine and, through majority ownership in Eaglewood Energy Inc, in Papua New Guinea.