All of Valeura’s land assets are in the Thrace Basin of Turkey.
In Turkey, Exploration Licences are held for an initial period of 5 years. There is a work programme obligation (drilling seismic, and/or studies) associated with each year and the annual programme must be complete prior to the end of that year. The holder may request two, 2-year extensions subject to agreeing a work programme obligation with the government for each of the years in the extension. Additionally, if there has been a discovery, then the holder can request a third, 2-year extension period. Petroleum can be produced during the exploration phase to the benefit of the holder.
Production Leases can be for an initial term of a maximum of 20 years. The initially granted term may be shorter than the maximum, if the expected production life of the discovered fields is less than 20 years. However, if less than the full 20-year term is awarded, this can be increased during the life of the production lease if production life is increased. If there are still reserves and production on the lease after the initial 20 year term then the holder can request two 10 year extensions. There is no work programme obligation during a production lease, but the holder is expected to take measures to maintain optimal production from the lease.
The Group’s primary producing assets are, at this time, located in the South Thrace Lands and the West Thrace Lands (the “TBNG JV Lands”), where natural gas is produced from relatively shallow reservoirs down to a depth of approximately 2,800 metres.
In the South Thrace Lands, the Group holds 11 Production Leases encompassing 170,735 gross acres. Valeura is the operator of the South Thrace Lands and holds an 81.5 per cent. working interest in the shallow rights and deep rights. The South Thrace Lands are jointly held by Valeura’s wholly-owned subsidiaries, TBNG (as to 41.5 per cent.) and CRBV (as to 40 per cent.), and PTI holds the other 18.5 per cent. working interest. There is no work programme obligation to the government.
In the West Thrace Lands, the Group holds three Production Leases and one Exploration Licence encompassing 102,012 gross acres. The Group’s 31.5 per cent. working interest in deep rights is held by TBNG, and the Group’s 81.5 per cent. working interest in shallow rights is jointly held by TBNG (as to 41.5 per cent.) and CRBV (as to 40 per cent.). Equinor (as to 50 per cent.) and PTI (as to 18.5 per cent.) hold the remaining working interest in the deep rights, and PTI holds the remaining 18.5 per cent. working interest in the shallow rights. Valeura is the operator of the West Thrace Lands which are subject to the West Thrace JOAs. The Exploration Licence has a two well commitment to fulfill the work programme obligation which must be completed by June 26, 2020.
The Group holds two Exploration Licences in the Banarli Lands encompassing 133,840 gross acres. It holds a 100 per cent. working interest in the shallow rights and 50 per cent. working interest in the deep rights through CRBV. Equinor holds the other 50 per cent. working interest in the deep rights. Rights are subject to the Banarli JOAs and the Banarli Farm-In and Valeura is currently the operator. The obligatory seismic and drilling work programs under the initial 5-year term to June 2020 of the two Banarli Exploration Licences have been completed, except for geological and geophysical studies, which are expected to be completed in 2020.
Equinor has a 50 per cent. working interest in the deep rights under the Banarli Farm-In which requires Equinor to fully fund: (1) the acquisition and processing of the Karaca 3D seismic program; (2) the drilling and testing of the Yamalik-1 well; and (3) the drilling and testing of Inanli-1 well. It is expected that Equinor will fulfill these obligations in 2019 once the testing of Inanli-1 is complete. If this work is not fully completed, 100 per cent. ownership of deep rights reverts to Valeura.
The boundary between the deep and shallow rights is determined by either a pressure gradient of 0.6 psi/ft (1.39 SG) or 2,500 metres depth, whichever is shallower. Valeura remains operator of the deep exploration programme on both the Banarli and West Thrace Lands during Equinor’s earning phase in Banarli. Equinor will have the option to request operatorship of the deep program once they have fully earned. Importantly, under the Banarli Farm-In Equinor has no pre-emption right related to the Valeura interests and there are some controls for Valeura’s benefit related to managing the pace of appraisal drilling prior to approval of a contemplated future pilot project for development.
The Group’s wholly-owned subsidiary VENBV holds a 35 per cent. working interest in three production leases in Edirne encompassing 49,883 gross acres. Otto Energy Limited (a subsidiary of TransAtlantic Petroleum) operates and holds the remaining 65 per cent. working interest. These leases currently do not have active operations or production.