Sonde Resources has received approval from Joint Oil's Board of Directors to farm-out 66.67% of its potential Zarat Field Exploitation Area and 50% of the remainder of its interest in the Joint Oil Block to Viking.
Joint Oil is equally owned by Libya and Tunisia.
In order to receive Joint Oil approval, certain terms of the farm-out agreement described in our December 27, 2012 press release, financial statements and annual information form are required to be amended.
The amendments to the farm-out agreement are summarized below. Joint Oil's approval of the assignment to Viking is subject to approval of the definitive form of Assignment Agreement and format of the Bank Guarantee (discussed below).
Completion of the assignment will require the execution of the definitive amendment to the farm-out agreement with Viking and closing of the farm-out. Viking has agreed to the conditions.
The amendments to the original farm-out agreement are as follows:
- Sonde will remain the operator of the Joint Oil Block;
- Sonde and Viking will post a bank guarantee equivalent to US$50.995 million as a guarantee for the 2013 through 2015 work obligations the ("Bank Guarantee"). Viking will contribute US$40 million to the guarantee and Sonde will contribute US$10.995 million (the "Balance") to the guarantee. Amounts under the Bank Guarantee will be released in accordance with a pre-determined formula as the work obligations are performed;
- Viking will acquire a 66.67% participating interest and Sonde will retain a 33.33% participating interest in the Zarat Field Exploitation Area;
- In consideration for contributing the Balance, Sonde will retain a 50% participating interest in the Joint Oil Block that is not covered by the exploitation area around the Zarat Field development. In addition, Sonde will recover the Balance from the initial proceeds from Zarat Field production in preference to the other terms of the farm-out; and
- Any future discoveries will be shared as to 50% for Sonde and 50% for Viking.
Sonde and Viking are in the process of completing the necessary documentation to effect amendments to the farm-out agreement, and this documentation is anticipated to be executed prior to the deadline of June 7, 2013 under the terms of the original farm-out agreement.
Jack Schanck, President and CEO said:
"Sonde is very pleased to have received the approval of Joint Oil's Board of Directors to the Viking farm-out. We are delighted to have the Viking Energy Group as our partner in the Joint Oil Block and are very excited to move to the next stage of the development of the Joint Oil Block. We look to this joint venture as a long-term relationship and commitment to our partner Joint Oil and its shareholders."
(Source: Sonde Resources)