- Warrego Energy (WGO) is buying a majority interest in the Spanish El Romeral gas production and power station
- El Romeral will be bought for $1.2 million by Warrego and joint venture partner Prospex Oil and Gas
- El Romeral will fully fund the purchase, while Prospex has 90 days to buy the remaining 49.9 per cent
- Whatever Prospex doesn’t buy will be given to Warrego
- Warrego shares saw a small morning spike but have since settled down to trade grey at 20 cents each
Warrego Energy (WGO) is buying up a majority interest in the El Romeral gas production and power station in southern Spain.
El Romeral is currently owned by Petroleum Oil and Gas, a subsidiary of Spanish big-cap electricity company Naturgy Energy Group.
Warrego will fork out €750,000 ($1.2 million) for the purchase through its Tarba Energia joint venture, which is 85 per cent owned by Warrego and 15 per cent by U.K.-based Prospex Oil and Gas.
However, Warrego and Prospex have signed an agreement whereby Warrego is paying up the full $1.2 million for the half-stake in El Romeral, while Prospect has 90 days to buy up the remaining 49.9 per cent. Whatever percentage Prospex doesn’t buy will be given to Warrego.
Warrego Managing Director and CEO Dennis Donald said the El Romeral purchase is a safe, strategic move.
“The acquisition of an onshore producing asset such as El Romeral represents a low-risk strategy to add reserves to our balance sheet and at the same time generate near-term cash flows to support future growth and complement the company’s exploration and appraisal activities at Tesorillo,” Dennis said.
“Our Board and management team have considerable previous experience of these types of operation and we expect the knowledge gained from operating El Romeral will also provide substantial benefits as we progress appraisal and development planning and gas marketing for the West Erregulla fields, in Western Australia,” he said.
El Romeral currently has three active wells producing a net 150 million standard cubic feet per day (mmcfd) of gas, according to Warrego. The 8.1 MW power station at El Romero operates 16 hours per day and is set to generate immediate revenue for Warrego to strengthen its balance sheet.
Looking ahead, the company said there is a “low-cost and rapid route to commercialisation” from tie-ins to the power station in late 2020 to early 2021. Warrego said will start planning to cash in with Prospex in the new year.
Warrego shares saw a small morning spike but have since settled down to trade grey at 20 cents each. The company’s market cap is valued at $138.27 million.