News

Interoil / News

Share price: View latest

News

InterOil settles tax claim with related parties regarding 2005 acquisition

(Lysaker, 28 July 2008) InterOil Exploration & Production ASA (InterOil) has entered into a settlement agreement with companies related to the chairman of the Board of Directors, Mårten Rød, and the chief executive officer, Nils N. Trulsvik. The agreement is subject to final approval by the company's general meeting. Following the settlement agreement, InterOil will cover 90 per cent of a potential tax claim of NOK 57.15 million related to the acquisition of the Swiss company InterOil SA in 2005. The claim has no immediate cash effect for InterOil, other than the coverage of legal costs, and no provisions will be made.
 
- The tax claim is related to the acquisition of InterOil's assets in South America in 2005 from companies related to Mårten Rød, chairman of the Board of Directors, and Nils N. Trulsvik, chief executive officer of InterOil. Since the claim involves related parties, the Board has received two independent legal opinions from Swiss lawyers (as the original share purchase agreement is governed by Swiss law), in addition to a legal assessment from Wikborg Rein in the preparation for the settlement. In addition the Board of Directors has received a confirmation of this assessment by the company's legal counsel, Wiersholm, says Patricia Guerra, member of the Board of Directors in InterOil, and continues:
 
- It's the Board of Directors' opinion that it's a fair balance between the value of what the company gives and the company receives. None of the involved related parties has taken part in the decision making process made by the Board of Directors, but still it has been concluded that the settlement must be approved by the company's extraordinary general meeting, ensuring a comprehensive process and discussion regarding the settlement
 
The claim relates to InterOil's acquisition of the operations in Peru and Colombia in 2005. Following this transaction, the Norwegian Tax Authorities initially suggested that a taxable income for InterOil might have been triggered as a result of the acquisition of the shares in InterOil SA to a price below market value. This was opposed by InterOil and the Tax Authorities elected not to pursue the matter. In June 2007, the Tax Authorities forwarded a similar, but reduced, claim against Eksportconsult AS, controlled by InterOil's chairman Mårten Rød, and Force Capital Partners AS, controlled by InterOil's CEO Nils N. Trulsvik, both hereinafter referred to as the "EF-shareholders". The EF-shareholders sent on June 27 2008 a claim to InterOil, requesting compensation for incurred and future costs related to the tax claim from the Norwegian Tax Authorities.
 
As a part of the preparation for the tax case, the Board of Directors has received a statement from Wiersholm regarding the possible outcome of the tax claim from the Norwegian Tax Authorities and a statement from an independent auditor, BDO Noraudit, in accordance with the applicable law.
 
InterOil's legal advisors are optimistic with respect to the outcome of the EF-shareholders' appeal to the Tax Authorities, and no provision, except for the interest element, will be made in the company's books regarding this claim.
 
Based on the investigation, the legal opinions and assessments received and following a thorough assessment by the independent Board members, the Board has entered into a settlement agreement with the EF-Shareholders (and for formal reasons, also Caberian Investment Inc., the third seller in which the Board member Gian Angelo Perrucci is involved). The settlement agreement can be summarized as follows: InterOil will cover 90 per cent of what, if any, the EF-shareholders finally will have to pay to the Tax Authorities, maximized to an amount of NOK 51.8 million, plus an interest cost element. In addition, InterOil will cover legal costs incurred by the EF-shareholders in the tax matter. As of today InterOil has been presented to cover expenses amounting to approx. NOK 1.5 million.  
 
The Board presumes the agreement in accordance with the Act on Public Limited Companies § 3-8 should be approved by the general meeting. The Board will hence immediately notify for such meeting. The Board's statement, included the settlement agreement and the auditor's statement, will be enclosed the notification for the general meeting.
 
For more information please contact:
Wilhelm Matheson
CFO
Tel: +47 6751 8652
Mob: +47 4147 8558
Fax: +47 6751 8660
E-mail: w.matheson@interoil.no

***************************
 
InterOil Exploration & Production ASA is a Norwegian based exploration and production company - listed on the Oslo Stock Exchange - with focus on Latin-America and West-Africa. The company is operator of several production and exploration assets in Peru and Colombia, and is an active license partner in Angola and Ghana. InterOil currently employs approximately 200 people and is headquartered in Oslo.

Interoil Main Office:
c/o Advokatfirmaet Schjødt AS
Ruseløkkveien 14
NO-0251 Oslo, Norway

Phone: (+47) 67 51 86 50
Fax: (+47) 67 51 86 60
info@interoil.no

Design & production: Innoventi