LONDON (ShareCast) - (Sharecast News) - Prospex Energy has signed a sale and purchase agreement with H2Oil for the sale of its wholly-owned subsidiary PXOG Massey, it announced on Wednesday.

The AIM-traded firm said Massey's sole asset was its 50% interest in the economic rights of the EIV-1 Suceava Concession, onshore Romania.

Under the terms of the agreement, the company said it would receive up to £0.22m in cash for historical debt owed to the company by Massey, and nominal consideration for shares in Massey, of which 85% of the funds, or £0.18m, had already been received by Prospex.

It said the sale of Massey followed a strategic review by the board of its portfolio of late-stage European onshore gas projects, which was instigated at the time of its acquisition of a 49.9% interest in the El Romeral gas and power project in Spain earlier in 2020.

Following the sale of Massey, Prospex said it would concentrate on advancing its three core projects, with the first being the Podere Gallina Exploration Permit, onshore Italy, where first production at the Selva gas field at an initial rate of up to 150,000 standard cubic metres per day was on course for the first half of 2021.

The El Romeral integrated gas and power project, onshore Spain, would see the firm focussed on increasing power generation at the existing 8.1 MW plant towards its 100% capacity via the drilling of low cost, low risk wells.

Prospex said operating at 100% capacity and selling electricity at Spain's historic average price of €70 per MWh, including subsidy, El Romeral had the potential to generate annual revenues and profit before tax of €4.2m and €2.4m, respectively

Finally, the company would also focus on the Tesorillo Gas Project, onshore Spain, where up to 830 billion cubic feet of gas of gross unrisked prospective resources had been identified

"The sale of our 50% interest in Suceava follows a long-term strategic review of our extensive portfolio," said managing director Edward Dawson.

"With the acquisition of El Romeral at the start of the year and with it the proposed addition of another 11 high quality, very low risk prospects it became clear that Suceava would be less core as time progressed.

"As well as providing useful capital, the sale will therefore bring more focus to the remaining core projects in our portfolio, all of which have the potential to hold company-making volumetrics and, importantly, multiple targets that could unlock the substantial resources we have identified."

Dawson said that at Podere Gallina, in addition to 13.3 billion cubic feet of gross gas reserves at the soon-to-be-producing Selva field, there were a further 14.1 billion cubic feet of gross contingent resources at the two historical gas producing North Flank and South Flank reservoirs, as well as four large prospects, which were estimated to hold aggregate gross prospective resources of 91.5 billion cubic feet.

He added that at El Romeral, two development locations and 11 prospects, which had been assigned gross contingent resources of five billion cubic feet and gross prospective gas resources of 90 billion cubic feet respectively, provided "significant scope" to increase gas production, and in the process increase the operational capacity of the 8.1 MW power station up to 100% from the current 22% level.

Finally, at the Tesorillo Gas Project in Spain, Dawson noted that up to 830 billion cubic feet of gas of gross unrisked prospective resources had been identified, and were in the process of being de-risked.

"With the Selva gas field in Italy on course to commence production in the first half of 2021 and the El Romeral acquisition advancing towards final government sign-off, which is expected to trigger a step-up in preparations for a low cost drilling campaign, we have a roadmap in place to progress our considerable resource base up the development curve, and in the process generate significant value for shareholders."

At 0944 BST, shares in Prospex Energy were up 2.38% at 2.15p.

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