Kairiki Energy Limited (Kairiki or the Company) reported Tuesday that it has terminated the binding term sheet with Focus Oil and Gas Limited (Focus) for the disposal of its entire interest in the share capital of Yilgarn Petroleum Philippines Pty Ltd. (Yilgarn) due to non-satisfaction of conditions precedent.
In contemplation of the likely non-satisfaction of the conditions precedent on the Focus agreement, Kairiki recently entered into discussions with its secured creditor IMC Oil & Gas Investments Ltd. (IMC) (the Company’s major shareholder and holder of a fixed and floating charge over the Company and Yilgarn) with respect to a restructure of the existing debt facility.
Kairiki advises that it has entered into a Share Purchase Agreement with IMC for the disposal of its entire interest in the share capital of Yilgarn (Disposal). Yilgarn is the holder of the Company’s interest in Service Contract 54A and 54B in the Philippines, being the main undertaking of the Company.
Yilgarn holds joint venture interests in the following Philippines Offshore Oil and Gas Permits:
As previously announced, the Philippines Department of Energy (DOE) approved a request for a moratorium on Service Contract 54 from Aug. 5, 2014 to Aug. 5, 2017 to give the joint venture sufficient time to study the development of the discovered marginal resources in the block. At the end of the moratorium period, the joint venture should elect to enter sub-phase 7 with a commitment to drill one well. If the joint venture elects to continue into the production period, the 3 year moratorium period will be automatically deducted to the initial production period.
As non-operator of service contract 54A and 54B the Company has minimal control (other than through its minority participating interest) over future activities within the licenses and therefore any future financial obligations, including timing. In addition, the moratorium approved by the DOE could potentially result in the Company being relatively inactive through until August 2017.
The Company has limited cash resources to undertake any potential exploration program and limited opportunity to raise new capital without certainty over the future direction of service contract 54A and 54B.
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