Soco International to buy Egypt’s Merlon Petroleum for $215m

UK oil and gas firm Soco International has signed a $215m agreement to acquire Merlon Petroleum El Fayum Company, which holds a 100% operated working interest in the El Fayum concession in Egypt.

Under the terms of the agreement, Soco will make a cash payment of $136m and issue around 66 million new shares to Merlon.

The shares to be issued represent 19.75% of Soco’s existing issued share capital.

The transaction will also see the company arrange the repayment of Merlon’s net debt, which stands at $22m as of 31 December last year.

It is in line with Soco’s stated objective of expanding and diversifying its resource base to create a full-cycle, growth orientated exploration and production (E&P) company of scale.

Located in the Western Desert, around 80km south west of Cairo, the El Fayum concession will provide 1,570km² of exploration acreage with multiple, identified exploration prospects in proven petroleum systems.

Soco will also have access to a large underexplored area in the northern portion of the concession.

Following the completion of the acquisition, Soco will receive immediate cash generative production and incremental 2P working interest reserves of 24mmbbls and 2C working interest resources of 37mmbbls.

The acquisition will also add expected average production of 6,500-7,000bopd this year.

Soco International president and CEO Ed Story said: “In addition to providing a high-quality, free cash flow generating oil concession with significant development upside and exploration optionality, Merlon creates a new hub for our business in Egypt, which we will utilise to support further growth not only in Egypt but also the wider MENA region, both organically and through additional M&A.

“This accretive, high-quality transaction represents a significant step in the reshaping of Soco as a full-cycle, growth-orientated E&P.”

Subject to the receipt of shareholder and regulatory approvals, the transaction is anticipated to be closed in the first half of next year.

Merlon Petroleum El Fayum Company is a subsidiary of oil and gas exploration and production company Merlon International.