Ivanhoe Finalizes Transfer of Zitong Block to Shell China
Ivanhoe Energy Inc. announced that through its wholly-owned subsidiary Sunwing Zitong Energy (Sunwing), it has completed the previously announced transfer of the Company's participating interest in the Contract for Exploration, Development and Production in the Zitong Block (Petroleum Contract) to Shell China Exploration and Production Co. (Shell).
In exchange for Sunwing's interest in the Zitong Petroleum Contract, the Company will receive total pre-tax cash proceeds of $105 million. Initial pre-tax proceeds of approximately $96 million were delivered on closing. Per the terms of the transaction, the Company will receive two remaining components of the proceeds as follows:
- the remaining portion of the $85 million recoverable past costs supported by the 2012 seismic program, once China National Petroleum Corporation (CNPC) completes its annual cost recovery audit for 2012 expenditures
- $5.1 million representing a customary holdback of 5 per cent of gross proceeds payable in six months
With the completion of the transaction, Shell will assume the obligations under the Supplementary Agreement and will replace the Company's performance bond with its own. As a result, the collateral for that performance bond, currently presented as restricted cash on the Company's balance sheet, will be released.
The closing of this transaction, and the recently closed divestiture of Pan-China Resources announced on December 17, 2012, will provide Ivanhoe Energy with available pre-tax working capital of $170 million. Within the next 30 days the Company will retire the $50 million bridge loan outstanding as well as the $10 million owed to Ivanhoe Capital. This will leave Ivanhoe Energy debt-free, other than the CAD$73 million convertible debentures which will mature on June 30, 2016.
"In 2012, Ivanhoe Energy has taken significant steps to focus the Company, and enhance our liquidity. We now have a healthy balance sheet, and in 2013 we will be focused on making substantial progress in the commercialization of our Heavy to Light (HTL) technology, and developing the Tamarack Project in Canada and Block 20 in Ecuador," said Carlos A. Cabrera, Ivanhoe Energy's Executive Chairman.
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