Seven Seas Sells Producing Properties
Seven Seas Petroleum's Colombian subsidiaries entered into an Asset Purchase Agreement with Sociedad Internacional Petrolera S.A. ("Sipetrol") for sale of the subsidiaries' interest in the shallow Guaduas Oil Field, inclusive of the 40-mile Guaduas-La Dorada Pipeline effective December 13, 2002.
Sipetrol has agreed to purchase the combined 57.7% participating interests and related assets of Seven Seas Petroleum Colombia, Inc., GHK Company Colombia and Petrolinson S.A. in the shallow Guaduas Oil Field. Sipetrol is currently a 32.9% owner of participating interest in the shallow Guaduas Oil Field and is a party to a Joint Operating Agreement with the subsidiaries. The basic terms are:
- The purchase price is $20 million subject to certain adjustments and taxes
- The effective time is 7:00 am on December 13, 2002
- The Closing is contingent on obtaining governmental approvals from both Chile and Colombia and the consent of Chesapeake Energy Corporation pursuant to the Note Purchase and Loan Agreement between Chesapeake and the Company, among other things
- The Closing is expected to occur in late January or early February
- GHK Company Colombia will continue to operate the shallow Guaduas Oil Field pending Closing
The Company engaged CIBC World Markets ("CIBC") to provide financial advice in late September 2002. CIBC commenced an auction process to sell the producing interests in the Guaduas Oil Field. This included establishing data rooms in Houston and in Colombia and soliciting interests from fifty companies. Nine companies went through the data rooms. Bids from several prospective buyers were received in mid- November and this process resulted in the agreement with Sipetrol.
After the sale, the only material assets of the Company and its subsidiaries will be the rights associated with the Deep Dindal association contract and certain Colombian tax assets. Neither the Company nor its subsidiaries will have sufficient cash to conduct any additional exploration activities.
The Company has been actively seeking to secure additional financing or find a partner to participate in the completion of the Escuela 2 well and test the commercial potential of the Deep Dindal prospect. To date, the Company has been unsuccessful in these efforts; however, the Company is continuing its efforts to find a third party to provide the necessary financing to test the Escuela 2 well. Even if tested, there are no assurances that the Escuela 2 well would be productive and provide additional value.
After December 15, 2002, the Company may be in default under the 12-1/2% $110 Million Senior Subordinated Notes. Now that the financial circumstances of the Company are more clearly defined, the Company will accelerate its discussions with representatives of the Senior Subordinated Noteholders.
The Company has received notice from Chesapeake that it is currently in default under its 12% $45 Million Senior Secured Notes ("$45 Million Notes"). Chesapeake as the collateral agent for the $45 Million Notes holds a lien on the stock of all of the Company's subsidiaries and its cash accounts.