Avenue Group, Inc. has executed a Letter of Intent ("LOI") with TomCo Energy Plc ("TomCo"), a London based AIM listed Oil & Gas Company, relating to a farm-out agreement which will allow TomCo to earn a 50 percent interest in the Heletz-Kokhav License (the "License").
Under the terms of the LOI, TomCo undertakes to within 5 days of signing the LOI, pay a non-refundable security deposit of US$75,000, granting TomCo 45 days exclusivity in which to sign a definitive agreement ("Closing"). This period can be increased to 60 days by TomCo paying an additional deposit of US$25,000; at Closing, pay AGI US$1 million in cash; at Closing, issue to AGI, TomCo ordinary shares ("Shares") valued at US$0.5 million at a price per share equivalent to the average middle market price for the seven days prior to Closing; at Closing pay to AGI 50 percent of costs incurred to date in relation to the License, which have been confirmed at US$108,000.
TomCo also intends to pay 100 percent of the three year work program covering the Phase 1 period of the License, estimated to cost approximately US$4.5 million; pay a further US$1.5 million to AGI upon the successful conversion of the License into a production lease; pay a further US$5 million to AGI upon recoverable reserves being certified at 10 million barrels or more by an internationally acceptable geologist.
Levi Mochkin, AGI's Chief Executive Officer, commented, "We are very pleased to sign an LOI with TomCo. Its management team has had a long and storied career in creating shareholder value in the energy and mining sectors and further underscores the potential of the Heletz-Kokhav oilfield. We look forward to concluding the definitive agreement with TomCo and to continue to work with TomCo in implementing the work program that will unlock the potential of the Heletz-Kokhav oilfield."
The Heletz-Kokhav License was awarded to AEI by the Israel Petroleum Commission in August of 2007. The Heletz-Kokhav license is comprised of 3 oil fields -- Heletz, Brur and Kochav -- equaling 229,600 dunam (approximately 60,000 acres), and is located approximately 55 km south of Tel Aviv and 12 km east of the Mediterranean Sea. Heletz was the first oil field discovered in the eastern Mediterranean and remains the most prolific oil field discovered onshore Israel.
The first well (Heletz 1) was drilled to a depth of 4800 feet (1515 Meters) and recognized as a producing well on 12 October 1955. Initial production was approximately 400 barrels per day; oil was 29 degrees API.
A total of 88 wells have been drilled on the Heletz field to depths ranging from 4,000 to 6,500 feet., of which 59 were producing wells with the other 29 having oil shows. Peak production occured between 1959-1967 when daily production was between 2,500 and 4,000 barrels of oil per day ("BOPD").
Total proven reserves have been estimated at 19.1 million barrels, of which 17.2 million barrels of oil has been recovered. Recovery estimates do not include secondary, tertiary recovery methods that may have the potential to raise production; these methods have not yet been applied to the field.
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