King & Spalding acts for Sierra Oil & Gas in Erdoel buyout

Law firm King & Spalding represented Mexican company Sierra Oil & Gas in its buyout by German oil exploration and production company Deutsche Erdoel AG.

Upon completion of the transaction, Sierra will be integrated into Deutsche Erdoel México, a fully-owned subsidiary of DEA AG. The resulting portfolio will consist of ten exploration blocks and one onshore production block and is expected to require capital investment of more than $2 billion over the next five years.

This is the largest upstream M&A transaction in Mexico since the 2013 energy reform, the law firm said.

Under the agreement, DEA commits to participate in the drilling of nine offshore exploration wells and to the development of the Zama field, a world-class discovery expected to provide a significant contribution to oil production growth in Mexico in the near term.

Established in 1899, DEA has a diversified portfolio of assets across Europe, North Africa and Latin America, and is one of the largest independent oil and gas companies in Europe. It has operated in Mexico since 2015 and has offices in Mexico City and Villahermosa.

Deutsche Erdoel México is the operator of the onshore Ogarrio oil field in partnership with state oi company Pemex, and holds interests in four offshore exploration blocks in the Tampico Misantla and Sureste basins.

“Our drilling program for 2019, which has taken years to plan, involves three appraisal wells in Zama and four exploration wells in other blocks, making Sierra one of the most active players in Mexico next year,” according to Ivan Sandrea, CEO of Sierra Oil & Gas. “With the support of DEA AG we expect to be able to realize the full potential of our asset base, delivering a faster development of the Zama discovery and ultimately making a significant contribution to the Mexican oil and gas industry.”

King & Spalding partners Martin Hunt (London/Houston) and Vera Brito De Gyarfas (Houston) led the team advising Sierra Oil & Gas, with the support of partner Peter Hays in Houston, counsel Todd Amdor in San Francisco and associate Nathan Zhang in Houston.

The transaction is expected to be completed during the first half of 2019, subject to regulatory approvals.