Wednesday 5 December 2018

- DEA acquires Sierra Oil & Gas, a leading Mexican independent oil and gas company.

- Sierra holds interests in approximately 9,400 square kilometres of exploration acreage in the core of the Sureste basin, including a 40% share in the world-class Zama discovery.

- Zama is one of the world’s largest shallow water discoveries, estimated to hold 400 to 800 million barrels of oil equivalent (boe) in recoverable volumes.

- DEA will add Sierra’s acreage to its existing portfolio of operated production and exploration blocks, becoming one of the largest exploration acreage holders in Mexico.

- The Sierra Oil & Gas team has a tremendous track record in Mexico and brings in-depth knowledge of the Mexican upstream sector to DEA.

DEA Deutsche Erdoel AG has signed an agreement to acquire Sierra Oil & Gas, a leading independent Mexican oil and gas company. Sierra holds interests in a portfolio of six exploration and appraisal blocks in Mexico, including the world class Zama discovery.

The transaction is an important milestone in DEA’s international growth strategy, fulfilling DEA’s objective of building a significant portfolio in the Mexican upstream market. DEA will add Sierra’s acreage to its existing portfolio of operated production and exploration blocks, to become one of the country’s largest acreage holders. Once completed, it will be the largest upstream M&A transaction in the country since the liberalization of the petroleum sector in 2013.

Sierra holds a 40% non-operated working interest in Block 7, containing a significant part of Zama, one of the largest shallow water discoveries in the past 20 years globally. As a whole, Zama is estimated to hold 400 million to 800 million barrels of recoverable oil equivalent and expected to start production by 2022/23. In addition, Sierra owns non-operated interests in five highly prospective exploration blocks. Sierra’s exploration blocks cover approximately 9,400 square kilometres in the core part of Mexico’s Sureste basin.

DEA currently operates the onshore Ogarrio oil field, in partnership with Pemex, and holds interests in exploration blocks in the Tampico Misantla and Sureste Basins. Following the acquisition of Sierra, DEA will hold interests in one onshore production block and ten exploration blocks, including the Zama discovery, which together will attract significant investments from DEA and its joint venture partners over the next five years.

The transaction is subject to obtaining government approvals, including from Mexico’s National Hydrocarbons Commission (CNH) and the Federal Economic Competition Commission (COFECE), as well as satisfying other customary conditions, and is expected to close in the first half of 2019. The acquisition will be fully equity funded by LetterOne.