For Brownstone, the letter of intent marks an entry point into India's tight oil and gas market and access to Canoro's significant experience in that country's oil and gas industry. For Canoro, the deal strengthens the company's balance sheet and reduces its capital exposure to exploration, and provides flexibility for development expenses for the Amguri field and the Indian government's upcoming NELP-VI licensing round.
To earn the 15 percent participating interest in both blocks, Brownstone will be paying a portion of Canoro's past and current costs, including 2-D seismic costs, in the aggregate of up to US$2 million with respect to work on the blocks. In addition, Brownstone will issue to Canoro 400,000 common shares and 200,000 share purchase options entitling Canoro to purchase one common share in Brownstone at a price of $2.20 for a period of five years, subject to Toronto Stock Exchange (TSX) approval.
Canoro's existing partners in each block have pre-emptive rights on any transfer of interest by Canoro. The transaction is also subject to usual conditions including due diligence and approval by the TSX Venture Exchange.
Canoro and Brownstone have also agreed to work together on future opportunities in India for the next three years.
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