Rex International, a technology-driven oil company, has announced that its direct wholly-owned subsidiary Rex International Investment ('RII') has entered into options agreements with Trace Atlantic Oil, for Trace to have options to receive shares of proceeds of potential dividends from its subsidiary Lime Petroleum ('LPA') due to RII if drilling activities of the Apollonia prospect in licences PL263D/E and the Fat Canyon prospect in licences PL937/B are successful respectively. RII has a 90% interest in LPA.
Option fees totalling US$1.1 million, comprising US$550,000 for each well, will be used to fund part of LPA’s participation in the exploration drilling of the two above mentioned prospects. Should the Apollonia and Fat Canyon wells result in oil discoveries, Trace stands to receive 6.75 per cent and 12.00 per cent of dividends due to RII from any successful sales of the respective licences.
The Group’s interests in LPA will remain unchanged should all options be exercised by Trace. If the contemplated wells in PL263D/E and/or PL937/B turn out dry and unsuccessful (as determined by the Norwegian Oil Directorate), each option relating to the respective wells shall lapse and the terms under the Options Agreements shall be null and void, and RII shall not be liable for any payments whatsoever. Further details of the Options Agreements can be found in the Company’s announcement dated 9 September 2020.
Mr Dan Brostrom, Executive Chairman of Rex, said:
'This is an innovative way to ‘farm-out’ our assets at a premium valuation without diluting our interest in our 90 per cent subsidiary, LPA. The Group has always been prudent in its cash management and the optionsagreementsallow us to reduce our financial exposure in funding LPA’s participation in the two exploration wells, especially in the current challenging market environment.'
On 1 September 2020, Rex announced the completion of LPA’s 20 per cent farm-in to the PL263D/E licences, with an effective date from 1 January 2020 (a standard practice for licence transactions in Norway). The operator Equinor is now expected to spud an exploration well targeting the prospect Apollonia on the licences in late September 2020.
LPA’s 15 per cent farm-in to each of the licences PL937 and PL937B in the Norwegian Sea, also with an effective date from 1 January 2020, was completed on 29 May 2020. Exploration drilling on the licences on the prospect Fat Canyon is expected in early 2021. The Fat Canyon prospect is located in the well-known Jurassic reservoir and has strong support from the Group’s proprietary Rex Virtual Drilling technology.
Source: Rex International