Oil and gas explorer and producer Longford Energy has entered an agreement to sell its 40% stake in the Chia Surkh exploration block in the Kurdistan region of Iraq to Genel Energy for $68m.
As part of the transaction, Genel will pay $42m in cash to Forbes & Manhattan (Kurdistan), a unit of Longford Energy. The remaining $26m will be paid directly to the Kurdistan Regional Government in respect of Forbes & Manhattan's outstanding obligations.
Canada-based Longford, through its subsidiary, acquired its stake in the Chia Surkh block production sharing contract (PSC) in 2009. The PSC's three-year first exploration term was to expire on 11 June 2012. At the time of the stake acquisition, Longford president and CEO Ahmed Said said that the company would spend more than $100m over three years on the exploration of the Chia Surkh block.
"However, due to challenging market conditions, Longford was not able to fully capitalise this project to meet the commitments," added Said.
In a separate deal, Genel is to acquire a 20% stake in the same block from Petoil Petroleum for $26m and will become the licence operator. The Anglo-Turkish oil and gas firm is already a 20% stakeholder in the block, and the acquisition of interests from Longford and Petoil will increase Genel's stake in the block to 80%.
The Chia Surkh block, which covers 984km2 in the southern part of Kurdistan, has prospective resources estimated at over 300 million barrels of oil equivalent.