On 2 April 2019, SOCO International plc (SOCO) announced the completion of the acquisition of the Merlon Petroleum El Fayum Company (Merlon) from Merlon International LLC. The companies reached an agreement about the transaction in September 2018. Purchase price is USD 215 million to be satisfied with approximately USD 136 million in cash and the issue of c.66 million new SOCO shares, representing 19.75% of SOCOâs current issued share capital. SOCO will also arrange for the repayment of Merlonâs net debt, which was approximately USD 22 million as at 31 December 2017.  Merlon holds a 100% working interest in the onshore El Fayum concession, which is operated by Petrosilah, a JV between Merlon International and EGPC, created in May 2010 to develop the discoveries made in El Fayum exploration block.  SOCO reported that the acquisition is expected to add immediate cash generative production and incremental 2P (net) reserves of 24 MMb and 2C (net) resources of 37 MMb.   Merlon produced 5,692 bo/d during Q1 2019, with the potential to increase production levels to a target in excess of 15,000 bo/d (net) by 2023 through the recovery of its discovered 2P reserves and 2C resources.  SOCO plans to focus on offsetting the recent decline and then growing production through additional drilling and the implementation of a secondary recovery programme in the core El Fayum fields. The company will contract a second rig to drill more production wells including injectors to enhance the secondary water flooding. Drilling operations are expected to commence in May 2019. Soco will also build new facilities (e.g. water storage, treatment facilities and flow lines).  Background information  In 2017 Merlon produced 7,859 bo/d (net) from El Fayum. There were 52 producing wells in 11 development leases. The term of each development lease is 20 years with an option to extend for an additional 10 years. Assuming extensions, the El Fayum development leases expire in 2039-2040.    El Fayum has stacked oil dominated reservoirs with no significant gas discoveries. Producing reservoirs are cretaceous sandstones within varying depositional environments. Many of theÂ reservoirsÂ exhibit favorable conditions for secondary recovery, and several successful waterflood programs are in progress.    Gross working interest daily production averaged approximately 7,900 BOPD over 2017. In accordance with the terms of the production Sharing Contract, Egypt received 1.6MMBbls of crude from Fayum during 2017.    Merlon Petroleum Company operated the Qantara, Mansoura, and Southeast Mansoura concessions in the Nile Delta and was subsequently sold to Melrose Petroleum in 2006. Prior to that, members of Merlonâs management team led Phoenix Resource Company which discovered the prolific Qarun and Khalda fields in the Western Desert. Phoenix was sold to Apache Corporation in 1996 and was Apacheâs initial entrance into Egypt.
Soco acquired Merlon Petroleum El Fayum for ab. US$215 MM. Merlon holds a 100% working interest in the onshore El Fayum concession