In January 2006, FirstAfrica exercised its option to acquire from Energem the rights to Energem's upstream oil and gas exploitation and transport concession agreement for the Chari-Ouest and Largeau basins in the Republic of Chad. On the basis of independent valuations the purchase price was agreed at US$62 million net of all deductions due under the terms of the option agreement. The consideration was agreed to be payable to Energem in Ordinary Shares at a price of 6 pence per Ordinary Share, for a total of 570 million shares to be issued on completion of the Chad Vend-in. It was also agreed that an additional US$6 million signing bonus due to the Chad government would be paid in cash to Energem upon completion.
The Chad Vend-in was to be completed by 7th June 2006, and required satisfactory completion of due diligence. The vend-in deadline was extended twice to 21 August 2006 to accommodate the completion of due diligence but that completion was not possible due to various technical and other issues associated with Energem's rights. As a result, the option has been allowed to lapse and the transaction will not proceed. FirstAfrica will make a provision in its interim balance sheet against the option of US$ 10.988 million, the value that it has carried for the option in its books. FirstAfrica and Energem are, however, in discussion concerning a possible alternative arrangement which may in the future include a minority farm-in by FirstAfrica into the Chad asset from which FirstAfrica would expect to receive some or all of this value. As a result of the lapsing of this option, Energem's shareholding in FirstAfrica will remain at 28.9%.
On 3 February 2006 FirstAfrica agreed to acquire for US$ 1 million Energem's rights to Mali exploration blocks 12 and 13, subject to the satisfactory completion of due diligence. The board of FirstAfrica today also announces that this agreement has been terminated because the Government of the Republic of Mali has published an "arete" which cancels the Production Sharing Agreements between it and Energem Petroleum Corporation Limited in respect of exploration blocks 12 and 13 in the Nara trench.
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