Interoil Exploration and Production has announced that its Colombian subsidiary, Interoil Colombia Exploration and Production ('ICEP'), has reached an agreement with the Colombian National Hydrocarbons Agency -Agencia Nacional de Hidrocarburos- (the 'ANH') for a partial termination of the Exploration and Production contract between ICEP and the ANH over the LLA-47 block (the 'LLA-47 Contract').
This contract termination is predicated upon the difficulties related to community's unflinching opposition to exploration activities that have prevented normal development of activities and satisfaction of exploratory commitments for an extensive period of time, which motivated several time extensions and suspensions granted by the ANH to contract term.
Under such partial termination, the provisions of the LLA-47 Contract concerning exploration activities and commitments shall be terminated and the exploration area of the block shall be handed back to the ANH, but without affecting production from the Vikingo well exploitation area that has not be objected by the communities and that shall continue for the remaining economic life of the well.
Subject to the terms of the termination agreement to be entered into by ICEP and the ANH, the termination of the LLA-47 Contract shall be made without penalties or compensations of any kind to be made by ICEP or the Company for the frustration of the exploration commitments, or requirements to carry out in other area any of the exploratory investment commitments arising out of the LLA-47 Contract and pending at present.
These commitments consist in the drilling of nine (9) exploration wells representing an aggregate exploration investment of USD 27,000,000. In turn, production from the Vikingo well exploitation area is expected to continue for the remaining economic life of the well.
In addition, and for the same reasons that affected the LLA-47 Contract, a termination of the Exploration and Production contract between ICEP and the ANH over the neighboring Altair block (the 'Altair Contract') is also expected.
This termination would also be made without penalties or compensations of any kind to be made by ICEP or the Company, or requirement to carry out in other area the only exploratory investment commitment pending in the Altair Contract consisting in the drilling of one (1) exploration well, with an exploration investment value of USD 3,000,000. In this case, contract termination would be total rather than partial as the Altair block is not in production and no exploitation area would be retained by ICEP.
As part of the termination process, and in accordance with the provisions of the LLA-47 Contract, the ANH has permitted ICEP to reduce the guarantees securing the LLA-47 Contract from a total of usd 11,100,000 to a sum of USD 100,000. A reduction also to USD 100,000 of the USD 300,000 guarantee securing the Altair Contract has also been granted by the ANH.
Termination of the LLA-47 Contract shall be submitted to the consideration of an internal Committee of the ANH and execution of the Minutes of Partial Termination providing, inter alia, for the transfer back to the ANH of the exploration area of the block, the reporting of the termination to the communities, the issue of acknowledgements of exploration activities carried out in the area and several certificates and clearance receipts on labor and suppliers payments.
The Company, in turn, shall also summon for a written resolution approving the terminations referred to herein by the holders of the Senior Secured Callable Bonds 2015/2026 issued by the Company. A separate announcement will be made when the proposal to the bondholders is distributed.
Source: Interoil
