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Deal 5: Aspect Energy GC Amy Flakne on Oil and Gas Production Sharing Agreement with Ukraine

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On January 19, 2021, CEE Legal Matters reported that Redcliffe Partners had advised US investors Aspect Energy and SigmaBleyzer — acting jointly through a special-purpose vehicle, Ukrainian Energy, L.L.C. — on an oil & gas production sharing agreement with the Republic of Ukraine. CEEIHM spoke with Amy Flakne, General Counsel at Aspect Energy, to learn more about the deal.

CEEIHM: Let's start with an overview of Aspect Energy and its operations.

Amy: Aspect is a privately held oil, gas, and helium exploration and production company based in Denver, Colorado, and Budapest, Hungary.  Aspect’s mission is to bring technology, agility, and creativity to the search for new sources of energy in an environmentally and socially responsible manner. Alex Cranberg, our Chairman and CEO, formed Aspect in 1992. Aspect is most currently active in the United States, Hungary (as the leading oil producer), Croatia, Slovakia, Romania, and Ukraine. Aspect has also participated in significant discoveries in Belize, Kurdistan, and Peru. Aspect has drilled over 500 exploration wells and built and sold a large unconventional gas development in Texas and Arkansas.

In the renewable energy space, Aspect has been the lead investor in a pioneering US wind developer, an investor in a cutting-edge battery material company, and the holder of a highly prospective geothermal permit in Hungary. Aspect is particularly proud of its proprietary know-how and track record in the use of the 3D seismic tool for large-scale exploration purposes.

Aspect is deeply committed to partnering with the local communities in which we operate to act as a responsible neighbor, safeguard the environment, and find opportunities to address existing social issues in those communities, with a focus on education, health, and the environment.  

CEEIHM: For the purpose of this deal, you acted jointly with SigmaBleyzer through a special-purpose vehicle. How did this partnership come to be and why did you choose this set-up?

Amy: Aspect is a private international exploration company with substantial experience working in Central and Eastern Europe, but with no experience working in Ukraine. SigmaBleyzer is a private equity firm with deep roots in Ukraine.  There was a natural symbiosis resulting from partnering together on an oil and gas investment in Ukraine.

CEEIHM: What was it about this project that Aspect Energy found particularly attractive and what are the main terms of the agreement reached with the Republic of Ukraine?

Amy: The geology! We are very excited about the prospectivity of the Varvynska block. Subject to certain conditions precedent, we have committed to spending at least USD 41.5 million during the first four years of the exploration period, as well as drill at least three exploration wells and carry out 3D seismic on 700 square kilometers of land. We have also committed to investing in the development of local communities and professional development programs for Ukrainian personnel.  We are very excited to develop our block and contribute to Ukrainian energy independence. And it doesn’t hurt that our work takes us to Kyiv, where we get to enjoy borsch and Chicken Kyiv … the Kyiv restaurant scene is one of my favorite in the world.

CEEIHM: As you mentioned, USD 41.5 million is expected to be spent in the first four years of the exploration period. What are the first steps, and what is your broad timeline?

Amy: We’ve collected and purchased some data to evaluate the prospectivity of the block. Now we are acquiring additional well and older 2D data, and building maps to define the best areas to begin our exploration efforts. This next exploration phase entails shooting 3D seismic. Aspect has a long history of reducing exploration risk by acquiring proprietary seismic and then processing it using our own specially-designed processing protocols. Multiple play types have been identified over the block and we will now design the surveys to optimally image these diverse oil and gas reservoirs. Once the data is shot and processed Aspect and its teams in Kyiv, Budapest, and Denver will begin an intensive interpretation effort to precisely locate the first prospects to be tested.

CEEIHM:  Why did you select Redcliffe Partners for assistance on this deal?

Amy: Redcliffe is one of the few firms in Ukraine with experience negotiating PSAs with the government, and that was important to us. But beyond that, the entire Redcliffe team impressed us from the moment of introduction and throughout the process with their professionalism, hard work, and savvy legal counsel. They have been fantastic partners, critical to getting the signed PSA across the finish line, and we are so appreciative of their efforts and contribution. I have worked with counsel all of the world, and Redcliffe stands among the very best.

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