London-based oil and gas company Terra Resources has entered into a financial partnership with Hendon Energy Fund 2011 to develop an oil and gas concession in Russia.
Hendon has agreed to partner with Terra Resources to fulfil its funding commitments, which are estimated to be $90 million, for the development of the 85,000 acre oil and gas concession in Kalmykia.
Earlier this year, Terra engaged Baker Hughes to assist with a field development programme, having already obtained an evaluation of its contingent reserves that indicated a fair market value for the concession of $633 million.
Hendon purchased a 44 per cent stake in Terra Resources from KLEL Funds—an early investor in Terra—for $25 million in June 2011.
Commenting on the news, Hendon’s managing director Ed Davis said: "Hendon is pleased to be participating in the financing of the Kalmykia oil and gas assets. As a strategic oil and gas investor, we view our partnership with Terra Resources as a unique opportunity, and are excited to be invested in Kalmykia.”
Terra Resources' director Charles Salisbury added: "Terra welcomes Hendon as an equity partner, and looks forward to a long term beneficial relationship.”
Terra Resources has acquired substantial oil and gas concessions in the North Caspian Sea Basin region of Kalmykia, which is regarded as one of the richest oil and gas regions worldwide.The fields contain 64 existing wells, drilled over 40 years ago in the Soviet era, of which 62 were producing. Terra now plans to re-open the wells and secure transportation via a newly built gas and oil pipeline.
Of the 62 producing wells, seven are listed as potential ‘super giant’ finds. A report on the concessions has given a ‘best case’ estimated value of $7 to $11 billion, with an estimated $175 million of development costs over the life of the reserves.
