Oslo, 9 May 2023
Interoil Exploration and Production ASA (the "Company" or "IOX") is pleased to announce the execution of a binding term sheet (the "Term Sheet") whereby Interoil and the Argentine company Selva María Oil S.A. (“SMO”, and with Interoil each a “Buyer” and together the “Buyers”) undertake to acquire from Echo Energy Plc (“Echo”) and its subsidiaries Eco Energy CDL OP Ltd. and Eco Energy TA OP Ltd. (both such subsidiaries together with Echo, the “Sellers”) (i) 65% of the aggregate interest and assets in and to five exploitation concessions located in the Province of Santa Cruz, Argentina, namely CA-1 “Campo Bremen”, CA-4 “Moy Aike”, CA-6 “Chorrillos”, CA-10 “Palermo Aike” and CA-9 “Océano” (the “Exploitation Concessions’), and the related joint venture, as well as (ii) a 95% interest in and to the transport concession (the “Transport Concession”) owned by Echo on the Océano area (the “Transaction”, and the interest and assets contemplated thereunder, the “Target Interest and Assets”). The Company already owns 8.34% in the Exploitation Concessions and the related joint venture serving as operator thereunder. SMO served as operator of the joint venture immediately prior to the appointment of Interoil as operator.
Subject to final negotiations and adjustments among the parties as to the participating interest to be eventually acquired by each Buyer, Interoil is expected to receive approximately a third of the Target Interest and Assets, which would represent approximately a 22.00% direct interest in the Exploitation Concessions and related joint venture (which when added to the 8.34% working interest that IOX already holds in such concessions and joint venture would made an aggregate of slightly more than 30% working interest for IOX). Under such scenario, and considering that the current joint venture’s daily production amounts to approximately 2000 boepd, upon completion of the Transaction, IOX would be adding approximately 440 boepd to its aggregate equity portfolio which would increase to a total of approximately 1100 boepd.
On completion of the Transaction, Sellers will retain a 5% working interest in the Exploitation Concessions, related joint venture and the Transport Concession, and will be vested with an option to buy another 5% back from Buyers.
The Transaction shall be subject inter alia to Sellers’ shareholder approval, and it will contemplate aggregate consideration to be paid by the Buyers for the purchase of the Target Interest and Assets, as follows:
- A cash consideration of £825,000, payable by means of an upfront payment of £75,000 upon execution of the transaction documents (expected to occur within a week from the Term Sheet), and the balance of £750,000 payable at Completion (expected to occur 30 calendar days from the Term Sheet);
- A payment in kind of £400,000 via transfer to Sellers of IOX shares at a subscription price of 1.15 NOK per share, to be made upon Completion;
- An additional contingent payment of up to £400,000 should production from the joint venture exceed from 4,000 boepd, provided that such aggregate contingent payment shall not exceed 10% of the net profits over the production referenced above, after taxes and investments, obtained by the joint venture as from the moment when any and all amounts invested by Buyers in the Transaction have been repaid to Buyers, and aggregate losses of the joint venture have been balanced with profits; and provided further that any accrual of contingent consideration shall be fully terminated upon the elapse of 5 years as from Completion;
- A further contingent payment of £100,000 should production from the joint venture exceed from 6,000 boepd, provided that such aggregate contingent payment shall not exceed 10% of the net profits over the production referenced above, after taxes and investments, obtained by the joint venture as from the moment when any and all amounts invested by Buyers in the Transaction have been repaid to Buyers, and aggregate losses of the joint venture have been balanced with profits; and provided further that any accrual of contingent consideration shall be fully terminated upon the elapse of 5 years as from Completion;
- Furthermore, the Buyers will provide a guarantee to cover Echo’s remaining 5% interest in the joint venture; and
- Also, as part of the consideration, Interoil shall grant to Sellers an option to drill an exploratory well at Campo Nuevo (Maná) Colombia, and to recover twice the cost through a 35% stake in the production, remaining after such recovery with the right to 10% of production (the “Drilling Option”), as well as a purchase option over Interoil’s Colombian assets exercisable if Sellers had exercised the Drilling Option, and after completion and testing the exploratory well, at consideration amounting to the valuation made by a recognized international investment bank appointed by the Buyers.
Additionally, at Completion Buyers will subscribe Echo shares for an aggregate amount £ 75,000, at a value of 0.065GBP per Echo share.
Echo will also retain an option to repurchase a 5% interest in the joint venture and related assets for a consideration of £ 100,000 over a 6 month period.
Benefits of Transaction to Interoil
The proposed Transaction allows Interoil to secure a substantial increase of its participating interest in the above-mentioned Santa Cruz Exploitation and Transport Concessions adding a significant number of boepd to its equity production against a convenient consideration substantially payable in kind and with limited dilution. The deal also results in an improvement of the joint venture ability to carry out actions for production increase through the incorporation of the former operator of the concessions as a new member of the joint venture, at the same time reducing the participation of Echo to an interest that better suits its current capabilities. The Drilling Option in turn adds opportunities for new exploration in Colombia with no financial commitment by the Company.
Echo Shareholders Approval
The Transaction requires approval at an Extraordinary Shareholders’ Meeting of Echo to be held within 25 calendar days from the date of execution of the Term Sheet.
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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 Colombia and Argentina. Interoil currently employs approximately 50 people and is headquartered in Oslo.
This notice contains information which is considered inside information pursuant to the European Market Abuse Regulation. The notice has been published by Mr. Geir Arne Drangeid (Partner and Senior Advisor, First House AS) at 19:30 CEST on 9 May 2023.
This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.