Ithaca Energy Secures Additional Funding for Athena Project
Ithaca Energy has entered into an agreement with Gemini Oil & Gas Fund II, L.P. whereby Gemini will provide non-recourse funding of US $6 million for the drilling and testing well 14/18b-15, comprising the Athena project on License P1293, currently underway in the Outer Moray Firth region of the UK North Sea.
The funding represents approximately 21% of the anticipated cost of drilling and testing the well. Gemini will not earn an equity interest in the field nor shall they be responsible for further costs of development should the well be successful. The funding is repayable only out of production from the Athena accumulation should the field be developed, in which case Gemini shall be entitled to receive payments based on Ithaca's 70% share of gross production ranging from 3.86% before recovery of the original $6 million declining to 2.57% before recovery of the next $6 million and 1.29% thereafter.
The agreement also provides that Ithaca shall have the right to redeem Gemini's funding with pre-determined payments ranging from $10 million to $7.5 million depending on the time of redemption. If such election is exercised by Ithaca, Gemini shall be granted, subject to TSX Venture approval, warrants to subscribe for 3 million common shares of the company exercisable within the earlier of 6 months from the date of issue or 5 years from the date of signing the Gemini agreement at a subscription price of US $3.00 per share.
License 1293 is currently held 90% Ithaca and 10% Wimbledon Oil and Gas Limited (Wimbledon). Wimbledon have confirmed their intention to participate to the extent of their 10% interest.
Following the farmout of a 20% interest to EWE Aktiengesellschaft (EWE) reported on September 6, 2006, the participating interests in License P1293 will be Ithaca 70%, EWE 20% and Wimbledon 10%. After the Gemini transaction, Ithaca shall fund approximately 24% of the cost of the well and its net revenue interest after the Gemini obligations will be 66.14% of gross production increasing to 68.71%.
Lawrie Payne, CEO of Ithaca commented: 'The agreement with Gemini is a very attractive, innovatively structured transaction as it substantially reduces Ithaca's risk in the initial well while providing a great deal of future flexibility. The combination of transactions with EWE and Gemini represent Ithaca's
philosophy of achieving significant leverage on our own capital while minimizing our equity dilution in each project. With working capital of approximately $54 million, Ithaca could have chosen to participate to a higher degree but chose instead to preserve capital where it had an opportunity to create leverage, for future involvement in other prospects in its portfolio.'
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