Under the proposed agreement, LGO will purchase Ascent's Spanish oil assets and the entire issued share capital of Ascent's wholly owned subsidiary Compania Petrolifera de Sedano ('CPS'). These assets have a book value of £321,000 and have an operating profit from production of £241,000. The consideration of €2.25 million and 8 million ordinary LGO shares will be partially used to repay outstanding intercompany loans in Spain.
Ascent's Spanish oil assets include 88.75% of the Ayoluengo field in the La Lora concession and CPS, which has a 50% interest in three exploration licenses, Huemeces, Basconcillos-H and Valderedibles. These licenses are held on a 50:50 basis with Tethys Oil AB of Sweden. The acquisition is conditional upon LGO gaining approval from its shareholders.
Ascent is retaining a presence in Spain with its 50% interest in the Rocamundo gas exploration application, where the company's partners are Tethys Oil and Shesa, the Basque oil company, which have a 30% interest and a 20% interest respectively. This exploration permit is expected to be issued later this year.
In Switzerland, Ascent has conditionally agreed to farm-out up to 40% of its 90% interest in the Seeland-Freinisberg Permit in northwestern Switzerland to LGO. Schweizerisches Erdol AG ('SEAG') is the concession holder with a 10% interest.
Under the terms of the farm-out, LGO will fund the costs of the drilling and testing of the first well in the exploration permit. Expenditure on subsequent exploration and production activities in this permit will be funded on a working interest basis. If LGO takes up its full 40% interest, it will additionally have the right of first refusal to participate in Ascent's other two Swiss projects on the same terms.
The 363.5 square kilometer surface-prospecting permit was awarded in July 2005, and the first exploration phase expires on December 31, 2007, with a three-year extension pending. The first phase work commitments, which have been completed, includes a spectral acoustic seismic trial, geochemical field studies and integration of the existing geological and geophysical data.
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