Asian Mineral Resources Limited (
the
“Company”) (ASN-TSX Venture) is pleased to announce that,
as more fully described below, its wholly-owned Nigerian-based
subsidiary, Decklar Petroleum Limited (“
Decklar”)
has arranged preliminary funding of US$26 million to develop its
Oza Oil Field in Nigeria. When fully disbursed, these funds are
expected to be sufficient to re-establish oil production and
provide development funding for the Company’s Oza Oil Field.
The Company’s CEO Duncan Blount commented:
“The funding arrangements represent a
significant milestone for the Company and will allow for re-entry
of existing wells, initial development drilling and the anticipated
re-establishment of oil production within 3-4 months after drawdown
of the funds. The fact that the funding is coming from an
established oil producer in Nigeria and large crude trader
underscore their confidence in the Oza Oil Field development
project, its management team and the upside of the field. We
are excited about the Oza Oil Field near-term production potential
and believe that this represents a fundamental turning point for
the Company. In the coming weeks, we will be working diligently to
satisfy the conditions for drawdown of the proposed funding.”
The Oza Oil Field
The Oza Oil Field was formerly operated by Shell
Petroleum Development Company of Nigeria Ltd.
(“Shell”). The field has three wells and one side
track drilled by Shell between 1959 and 1974. During the period
when Shell was the operator, there were two periods of extended
production testing from the Oza-1, -2 & -4 wells. The field was
never tied into an export facility, nor was it fully developed by
Shell and put into commercial production.
In 2003, the Oza Oil Field was awarded to
Millenium Oil and Gas Company Limited
(“Millenium”) having won the bid during the 2003
Marginal Fields Licensing Round. Since Millenium’s acquisition of
the Oza Oil Field, approximately US$50 million has been spent on
infrastructure in support of a restart of production including an
export pipeline to tie the Oza Oil Field production into the Trans
Niger Pipeline (TNP) which goes to the Bonny Export Terminal, a
lease automatic custody transfer (LACT) unit fiscal metering
system, infield flow-lines, manifolds and a rental 6,000 barrel per
day early production facility (“EPF”).
The Risk Service Agreement
(“RSA”) that Decklar and Millenium entered into
provides Decklar the majority share of production and associated
cash flow from the Oza Oil Field in exchange for funding and
technical assistance to restart commercial production and full
field development; the RSA terms including a preferential return of
Decklar’s costs plus a share of cash flow thereafter. In exchange,
Decklar is entitled to priority recovery of its capital from 80% of
distributable funds. After achieving cost recovery, Decklar’s
profit share is based on a sliding scale starting at 80% and
declining to 40% once cumulative production exceeds 10 million
bbls.
Upon final drawdown of the Loan Notes and
Development Debt (each as defined below), Decklar intends to
fast-track the initial development on the Oza Oil Field including a
re-entry on the existing Oza-1 well, anticipated to test three oil
bearing zones and place the well into production from two of the
three zones tested. The drilling rig is expected to then be skidded
on the same location as Oza-1 to a new drilling slot and a
development well will be drilled horizontal into the 3rd zone
tested in the Oza-1 well re-entry. This Oza-1 well and new
horizontal development well are anticipated to generate significant
production levels and cash flow in an abbreviated time frame. The
Oza development is anticipated to then continue with one or two
more re-entries on existing wells and additional development
drilling with a potential of eight to ten wells being drilled for
the full field development. Additional early production and central
processing facilities will be added as required to accommodate
additional production levels from field development activities.
The Oza Oil Field has significant export and
production capacity through processing facilities and
infrastructure already in-place and operational, which will allow
for the immediate export and sale of crude oil from the Oza-1 well
re-entry, the initial Oza horizontal development well and future
wells.
Subscription Agreement
Decklar has entered into a subscription
agreement (the “Subscription Agreement”) with San
Leon Energy Plc (“San Leon”), an AIM listed public
company focused on Nigerian production and development assets,
which is arm’s length to the Company (within the meaning of the
policies of the TSX Venture Exchange). The Subscription Agreement
entitles San Leon to purchase US$7,500,000 of 10% unsecured
subordinated loan notes of Decklar (the “Loan
Notes”) and 1,764,706 ordinary shares (“Decklar
Shares”) of Decklar (representing 15% of the share capital
of Decklar) for a cash consideration of US$7,500,000 and
N1,764,706, respectively. In addition, Decklar and San Leon have
entered into an option agreement (the “Option
Agreement”) that entitles San Leon to purchase an
additional US$7,500,000 of Loan Notes (the “Option Loan
Notes”) and 2,521,008 Decklar Shares (resulting in an
additional 15% of the share capital of Decklar to San Leon) for
cash consideration of US$7,500,000 and N2,521,008, respectively, at
any time until the date that is forty-five (45) days after the well
test results of the first development well on the Oza Oil Field
have been delivered to San Leon.
The Subscription Agreement provides for certain
conditions precedent to be confirmed prior to finalizing and
issuing of the Loan Notes and Decklar Shares, including entering
into an agreed form of shareholders’ agreement in respect of
Decklar and the restructuring of certain historical indebtedness by
the owner/operator of the Oza field, Millenium, to the satisfaction
of San Leon at its sole discretion.
In addition, Millenium has entered into a
non-binding term sheet with a local Nigerian bank and the trading
subsidiary of a large multinational oil company active in Nigeria
for up to US$33,000,000 in a five year term debt that provides a
use-of-proceeds of US$22,000,000 to refinance existing debt of
Millenium and US$11,000,000 for development activities on the Oza
Oil Field, based on entering into a crude sales and purchase
contract. Decklar is expected to provide a corporate guarantee as
part of this US$33,000,000 term debt facility (“Development
Debt”). Concurrently with entering into the
Subscription Agreement, San Leon has advanced US$750,000 as an
initial deposit (the “Deposit”) with the release
of the balance of the US$7,500,000 being subject to the
satisfaction (or waiver) of the conditions precedent contained in
the Subscription Agreement. In the event the transactions
contemplated by the Subscription Agreement are not completed on or
prior to September 30, 2020, Decklar will be required to repay the
Deposit to San Leon within three months of that date.
Loan Notes
The terms of the Loan Notes provide for an
interest rate of ten (10)% per annum, which accrues on a quarterly
basis and will have a maturity date that is five (5) years from the
date of issuance. No payments (whether on account of interest or
principal) are required under the Loan Notes unless there are
available funds from operations (after taking into account any
required debt servicing payments, general and administrative
expenses, approved joint venture capital and operating costs
required to be funded by Decklar under the RSA with Millenium,
taxes and other statutory payments) (the “Available
Funds”). All Available Funds shall be applied to the
payment of interest and principal in respect of the Loan Notes
until they are repaid in full. Upon repayment of the Loan Notes,
50% of the Available Funds will be applied to payment of interest
and principal in respect of the Option Loan Notes until they are
repaid in full, with the remaining 50% of such Available Funds
being retained by Decklar. The Loan Notes are unsecured,
subordinated and contain customary events of default. The Loan
Notes do not contain any financial or other maintenance
covenants.
The transactions contemplated by the
Subscription Agreement and Option Agreement are subject to approval
by the TSX Venture Exchange.
Duncan Blount, Chief Executive Officer, further
commented:
“We are delighted to have San Leon as a
shareholder in Decklar and partner in our Oza Oil Field
development. San Leon’s successful track record in Nigeria and
strong balance sheet will provide significant support and value to
the Company and to the Oza Oil Field partnership and field
development. We are also excited about the debt funding offered by
a large international crude trader, which allows for adequate
funding of the Oza Field development program. The combined funding
from San Leon and the crude trader amounts to US$26 million,
allowing for an aggressive re-entry and initial development
drilling program on the Oza Oil Field. The project is expected to
provide significant cash flow generation for organic growth and
on-going full field development. It is very much
transformational for the Company’s future. We look forward to a
strong and successful working relationship with Millenium, San Leon
and our crude trading partner and the near-term establishment of
production from the Oza Oil Field.”
For further information:
Duncan T. Blount Chief Executive Officer
Telephone: +1 305 890 6516Email: D.Blount@asianmineralres.com
David HalpinDecklar Petroleum Telephone: +1 403 816
3029Email:davidhalpin@decklarpetroleum.com
Investor Relations: IRTeam@asianmineralresources.com
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in policies
of the TSX Venture Exchange) accepts responsibility for the
adequacy or accuracy of this release.
Cautionary Language
Certain statements made and information
contained herein constitute "forward-looking information" (within
the meaning of applicable Canadian securities legislation). All
statements in this news release, other than statements of
historical facts, including statements with respect to Decklar
completing the transaction with San Leon, the completion of the
term debt facility by Millenium, any exercise of the Option
Agreement, the expected timing of the drilling of the Oza-1
re-entry well, the timing for a further development well, expected
production and cash flow from drilling activities and future well
re-entries and development drilling are forward-looking statements.
Such statements and information (together, "forward looking
statements") relate to future events or the Company's future
performance, business prospects or opportunities.
All statements other than statements of
historical fact may be forward-looking statements. Any statements
that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words
or phrases such as "seek", "anticipate", "plan", "continue",
"estimate", "expect, "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should",
"believe" and similar expressions) are not statements of historical
fact and may be "forward-looking statements". Forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. The Company believes that the expectations reflected in
those forward-looking statements are reasonable, but no assurance
can be given that these expectations will prove to be correct and
such forward-looking statements should not be unduly relied upon.
The Company does not intend, and does not assume any obligation, to
update these forward-looking statements, except as required by
applicable laws. These forward-looking statements involve risks and
uncertainties relating to, among other things, changes in oil
prices, results of exploration and development activities,
uninsured risks, regulatory changes, defects in title, availability
of materials and equipment, timeliness of government or other
regulatory approvals, actual performance of facilities,
availability of financing on reasonable terms, availability of
third party service providers, equipment and processes relative to
specifications and expectations and unanticipated environmental
impacts on operations. Actual results may differ materially from
those expressed or implied by such forward-looking statements.
The Company provides no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. The
Company does not assume the obligation to revise or update these
forward-looking statements after the date of this document or to
revise them to reflect the occurrence of future unanticipated
events, except as may be required under applicable securities
laws.
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