Mr. Arthur Millholland reports
NOCAL APPROVES REVISED PRODUCTION SHARING CONTRACT FOR BLOCK LB-13 OFFSHORE LIBERIA; CANADIAN OVERSEAS PETROLEUM REVISES AGREEMENTS WITH PEPPERCOAST PETROLEUM AND EXXONMOBIL
Canadian Overseas Petroleum Ltd. and its wholly owned subsidiary, Canadian Overseas Petroleum
Bermuda Ltd., have entered a
restated and amended production sharing contract (PSC) for block
LB-13 offshore Liberia with ExxonMobil Exploration and
Production Liberia Ltd. and the National Oil Company
of Liberia (NOCAL). The president of Liberia, Ellen Johnson
Sirleaf, has approved and signed the appropriate paperwork related to
the PSC so that it can be sent to the Liberian legislature for a
ratification vote. The terms of the PSC will take effect once
ratification has occurred and the PSC is enacted into law. Completion
of the transactions contemplated is expected to occur shortly after
ratification and remain subject to a number of conditions.
In addition, certain terms of the previously announced purchase
agreements between COPL, COPL Bermuda and Peppercoast Petroleum PLC, and between COPL Bermuda and ExxonMobil have been
amended. COPL Bermuda and ExxonMobil have amended the asset purchase
agreement announced Nov. 16, 2011, such that COPL Bermuda will now
have a 20-per-cent working interest in block LB-13 and ExxonMobil as operator
will have an 80-per-cent working interest. ExxonMobil will continue to pay COPL
Bermuda's working interest portion of drilling expenses for the first
$120-million of gross drilling costs committed under the PSC and COPL
Bermuda's share of joint venture costs up to the completion of those
operations. As part of the new arrangements, the payment terms as
between COPL Bermuda and Peppercoast have also changed from the
agreement announced in May, 2011.
The new arrangements call for the completion of the acquisition of the
original production sharing contract by COPL Bermuda to be financed by
NOCAL, such that NOCAL shall pay the obligations of COPL Bermuda to
Peppercoast. Following that transfer, the ExxonMobil affiliate will
pay to NOCAL (1) all funds previously owed to COPL Bermuda under the
asset purchase agreement, and (2) on behalf of COPL Bermuda and the
ExxonMobil affiliate, all amounts owed by COPL Bermuda and the
ExxonMobil affiliate to the government of Liberia on account of the
issuance of the PSC. Upon that payment, the PSC shall be owned 20 per cent by
COPL Bermuda and 80 per cent by the ExxonMobil affiliate. All payments will
follow the approval by the legislature of the Republic of Liberia of
these arrangements to assure transparency and compliance with law.
As a result of these changes, COPL will no longer issue any shares to
Peppercoast to complete the transaction. Further, other than legal
costs, usual closing costs and continuing fees under the PSC, COPL and
COPL Bermuda will have no net cash outlay or cost in connection with
the closings other than forgiveness of accounts receivable related to
the $15-million 3-D seismic licence fee owing by Peppercoast to COPL, and
other intercompany amounts and $7-million of fees payable to the
government of Liberia.
Arthur Millholland, president and chief executive officer of COPL, commented: "We are very pleased to have been able to reach agreement with
representatives from the government of Liberia, Nocal and ExxonMobil
for an amended PSC for block LB-13, and believe that this represents a
great opportunity for our shareholders and the citizens of Liberia.
The revised sale and purchase agreement with Peppercoast, and the
revised asset purchase agreement with ExxonMobil provide a low-risk
method for our involvement in block LB-13. We look forward to working
with ExxonMobil to begin planning exploration activities offshore
We seek Safe Harbor.
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