The Laurus agreement provides for execution by Garwood of a Secured Term Note ("Note") secured by the Kallina Lease interests and by the Petrosearch ownership interests in Garwood. As a part of the financing arrangement, Garwood likewise issued Laurus a warrant (simultaneously assigned by Laurus to Kallina Corporation, a wholly owned subsidiary of Laurus) to acquire, upon payout of the Note indebtedness, 45% of the outstanding common stock of Petrosearch's Garwood subsidiary such that upon exercise of the warrant, Garwood will be owned 55% by Petrosearch and 45% by Kallina Corporation. Advances under the Note shall bear interest at Wall Street Journal Prime plus 2%. Payments under the Note will be paid from 90% of net production revenues, and after 120 days from closing the Note will require a monthly minimum payment of $100,000.
As previously announced, the Kallina 46#1 was drilled to approximately 16,230 feet and encountered in excess of 250 feet of potentially productive net pay in the well. It is estimated that there are up to three additional drilling locations on the Kallina Lease. The Note also allows, but does not obligate, Laurus to finance additional development drilling on the property. Completion operations are slated to begin immediately.
Commenting on the transaction and financing, Richard Dole, Chief Executive Officer of Petrosearch stated, "We are extremely pleased to have a new financial relationship and have an agreement that benefits all parties concerned. This provides us an opportunity to increase our ownership and operations in the Southwest Garwood project." Mr. Dole added, "In addition to the Southwest Garwood Project we are continuing to advance our other two large resource projects, the Barnett Shale and the Quinduno water flood in the Texas panhandle of the Anadarko Basin."
Petrosearch Energy Corporation is a resource based energy company with project focus in the Barnett Shale, the Anadarko Basin of North Texas and the Wilcox trend of South Texas. The Company is a Nevada corporation with executive offices in Houston, Texas.
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