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Oslo, 4 November 2014 - This notice is prepared and published in accordance with section 3.4.1 and 3.4.2 of the Continuing Obligations of stock exchange listed companies.
The Transaction
As previously announced, on 31 October 2014 Interoil Exploration and Production ASA ("Interoil" or the "Company") entered into a transaction agreement (the "Agreement") pursuant to which it will transfer ownership of its Peruvian assets to United Oilfield Colombia Inc. ("UOC").
UOC and its affiliates are engaged in oil and gas related activities in Latin America. UOC or its affiliates currently have operations in Peru.
Interoil's Peruvian assets consist of the Peruvian subsidiaries Interoil Peru S.A. ("Interoil Peru"), and North Oil Services SA ("North Oil"), which are held through Interoil's Norwegian subsidiary Interoil Exploration and Production Latin America AS ("LATAM").
Interoil Peru's main activity is to produce oil from blocks III and IV in Peru. The license to produce oil on these blocks expires on 5 April 2015. Interoil will not get any extension of the license beyond this date, due to the fact that Interoil Peru does not qualify in the upcoming bid round for blocks III and IV. Consequently Interoil would have to liquidate Interoil Peru and wind down its operations after the expiry of the license agreements in April 2015. The liquidation would entail substantial costs to Interoil. Because of the anticipated costs Interoil would not be in a position to repatriate any cash from Peru in the period leading up to April 2015 regardless of the transaction with UOC. Therefore Interoil Peru today represents no value to Interoil.
UOC expects to participate in the upcoming bid round for the new licenses for blocks III and IV. UOC therefore expects to be able to develop Interoil Peru in the future and therefore continue to utilize the management and employees of Interoil Peru. Interoil therefore considers that a sale to UOC is preferable compared to a liquidation, as it lays the foundation for continued employment in Peru and allows the Interoil management to focus on the assets in Colombia.
For reasons described above, Interoil and UOC have decided to carry out a transaction whereby UOC will subscribe for new shares in LATAM in a private placement, and acquire the remaining shares of Interoil through a share purchase agreement. The consideration to Interoil is USD 1. In addition, UOC will also assume the debtor position of an intercompany debt of USD 2 million that Interoil has towards LATAM.
The transaction is made on an "as is" basis. If the transaction is completed, Interoil will therefore not have any further exposure towards the Peruvian assets other than a parent company guarantee to secure certain work obligations under the licenses, which are secured under a back-to-back arrangement with the buyer. Interoil is also party to certain litigation that it has initiated against the former manager of Interoil Peru.
The closing of the transaction will take place by UOC subscribing for new shares and injecting cash equity into LATAM. This will be completed after and if the bondholders have approved the transaction and there is a risk that the transaction will not be completed. The Company expects that a bondholders' meeting will be held on 17 November 2014, where the bondholders will be asked to approve the transaction.
Interoil Peru
The Board of Directors of Interoil Peru comprise of Anne Grete Ellingsen, Håkon Sandby and Thomas Fjell, who will resign as Board Members upon completion of the transaction. The key employee in Interoil Peru is Rodrigo Aguinaga (General Manager) and Ricardo Barrios (Legal Manager).
In total 105 people work in Interoil's operation in Peru and will follow the business in the transaction.
The Company has not entered into any agreement for the benefit of management or key personnel in Interoil. Rodrigo Aguinaga will receive a bonus equalling to USD 100 000 divided by 156 and multiplied with the number of days Aguinaga has been employed from 1 November 2014 to the date of closing of the transaction. Ricardo Barrios will receive a bonus equalling to USD 50 000 divided by 156 and multiplied with the number of days Barrios has been employed from 1 November 2014 to the date of closing of the transaction. This bonus will be covered by Interoil Peru.
Key figures for LATAM consolidated for the years ended 31 December 2011, 2012 and 2013 are included below. Due to the expiry of the licenses in April 2015, these are not representative of the expected financial results going forward.
| Interoil Exploration and Production Latin America AS consolidated numbers | |||||
| All numbers in USD 1000 | |||||
| 2011 | 2012 | 2013 | YTD Q3 2014 | ||
| Profit and loss | |||||
| Total Revenue | 146 310 | 119 944 | 53 355 | 31 944 | |
| Cost of goods sold ex depreciation and impairment | -32 547 | -36 630 | -15 682 | -11 553 | |
| Depreciation and impairment | -41 353 | -85 866 | -2 299 | -73 | |
| EBITDA | 99 528 | 62 952 | 27 669 | 16 077 | |
| Profit / (loss) from operating activities | 58 175 | -22 914 | 25 370 | 16 004 | |
| Profit and loss before income tax | 39 860 | -16 671 | 23 867 | 15 823 | |
| Income tax | -20 495 | 7 871 | -11 058 | -6 638 | |
| Profit and loss | 19 365 | -8 800 | 12 806 | 9 185 | |
| Balance | |||||
| Assets | 290 070 | 166 847 | 20 487 | 15 015 | |
| Equity | 135 142 | 102 503 | 6 053 | 5 215 | |
| Debt | 139 655 | 64 345 | 14 434 | 9 799 | |
| Numbers for 2011 and 2012 include Interoil Colombia | |||||
| Liquidation cost and other contingent liabilities are not included in the balance for Q3 2014 | |||||
| Numbers are not audited | |||||
Please direct any further questions to:
ir@interoil.no
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Interoil Exploration and Production ASA is a Norwegian based exploration and production company - listed on the Oslo Stock Exchange - with focus on Latin-America. The company is operator of several production and exploration assets in Peru and Colombia. Interoil currently employs approximately 230 people and is headquartered in Oslo.