Vermilion Energy Trust has completed its previously announced agreement to acquire Marathon Oil Corporation’s 18.5% non-operated interest in the Corrib field located approximately 83 kilometres off the northwest coast of Ireland. On closing, Vermilion paid US$100 million to Marathon and will pay an additional future payment, the amount of which will vary from approximately US$300 million to US$135 million depending on the date when first commercial gas (‘first gas’) from the field is achieved. Pursuant to the agreement, Vermilion will assume its share of future capital expenditure obligations in order to reach first gas. Beginning at the effective date of January 1, 2009, these costs are anticipated to range up to US$300 million net to the acquired interest.
The Corrib field is expected to produce gross volumes in excess of 300 million cubic feet per day of natural gas for a period of two to four years before experiencing natural declines of 20%. Net production to Vermilion is initially anticipated at approximately 9,000 boe/d. The Corrib asset will further enhance Vermilion’s global asset base and is anticipated to deliver strong, accretive returns.
Once on-stream, the production from Corrib is expected to increase Vermilion’s total annualized production by approximately 30% and generate significant operating cash flow. This acquisition positions Vermilion well for an eventual conversion to a corporation and the execution of its 2010 to 2015 strategic plan. The Corrib transaction also fits well with Vermilion’s European strategy and will provide Vermilion with another strong foothold in attractive European energy markets and a path of identifiable growth over the next few years. With Corrib, Vermilion’s European operation is anticipated to produce in excess of 20,000 boe per day of high netback light sweet oil and natural gas.