Oil & Gas Explorer Inks Major Acquisition Agreement With Mexican Firm, Shares Rally

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Tuesday, May 14, 2024

On a seemingly muted trading day for the broad markets, one micro-cap is making waves and with it is rallying to the tune of over 8% in early-morning trading. Shares of New Stratus Energy Inc. (TSX-Venture:NSE) are currently up 8.33% at $0.65 as the energy company with a strategic focus on the exploration and production of oil and gas resources announced the acquisition of an equity interest in Operaciones Petroleras Soledad S. de R.L. de C.V. (OPS), a private Mexican oil and gas firm. The strategic move underscores New Stratus's dedication to expanding its footprint in the energy sector, particularly in Mexico, a region ripe with development opportunities.

This agreement for New Stratus Energy Inc. secures a 49% equity interest in OPS, with the exclusive option to acquire an additional 41%. The acquisition is structured into two tranches, with the first tranche entailing the purchase of the initial equity interest. New Stratus's commitment includes funding capital expenditures and operational costs for the next two years under the hydrocarbons production contract awarded by Pemex Exploracion y Produccion, S.A. de C.V. The Soledad Block, situated in eastern Mexico, presents substantial development potential, with proven reserves estimated at 43.3 million barrels of oil equivalent and gross production currently standing at approximately 1,430 barrels of oil equivalent per day.

Under the terms of the agreement, New Stratus Energy Inc. is poised to play a pivotal role in OPS's operations, with the nomination of a director to OPS's board and the appointment of key technical and managerial positions. This strategic alignment facilitates effective oversight and operational synergy between the two entities. Furthermore, the second tranche of the acquisition offers New Stratus the opportunity to enhance its equity stake in OPS, subject to regulatory approval and contingent upon operational performance.

OPS, the third-party contractor and operator of the Soledad Block, has been instrumental in driving production since 2013. The amended hydrocarbons production contract, effective May 1, 2024, extends the term until 2039, with provisions for profit-sharing based on revenues. This incentivizes additional investment in the Soledad Block, with a focus on increasing production through an ambitious development plan approved by Pemex Exploracion y Produccion. 

Shares of NSE have been on an uptrend since bottoming in early-December of 2022. The stock did hit its recent highs back in late-December of 2023, but shares have been trading higher in the last couple of weeks. Today’s news may just be that catalyst needed to reignite the bullish momentum in the stock.

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