The Board of Mediterranean Oil & Gas Plc has entered into an $27.4 million credit facility with the Bank of Scotland Plc.
The $15.2 million tranche A facility will be applied towards the development cost of the company's interest in the Guendalina Gas Field (operator ENI: MOG 20%) and repaid from the company's share of Guendalina's production. The company estimates the Guendalina Gas Field has 2P reserves of 28 Bcf (100% basis) and expects first gas production in early 2010. Gas production is expected to be 5 Bcf (100% basis) in the first full year.
The $12.2 million tranche B facility is for general corporate purposes. It will be applied by the company towards its other exploration and development assets including the OM2 appraisal/development well on the company's 100% owned Ombrina Mare oil and gas field. The MV Galloway jackup rig is scheduled to commence mobilization for the OM2 well on 8 March 2008.
The credit facilities are available for a period of 30 months from the date of the agreement. The company has a right to extend the facilities for a further 30 months if the company meets the requirements to convert the loan to a borrowing base facility. The requirements for conversion and extension of the facility primarily relate to the company continuing to replace reserves utilized in production and a performance test on Guendalina once the field commences production. Costs of funds for the facility range between 8.6 % and 9.4 % per year, based on a fully drawn basis. The facilities are secured against the company's assets and are also subject to normal banking covenants including periodic reviews of the reserves.
Sergio Morandi, the company's CEO said: "In addition to our ongoing revenue from production, the Company now has in excess of €33 million available (post the recently announced JKX Italia acquisition) to fund our current work program.
The good operating cash flow from our Italian production and strong operational team in Italy enabled us to secure debt finance on attractive commercial terms from a quality institution, the Bank of Scotland, despite the current volatility in debt markets. We believe this ability to appropriately use debt and cash flow to fund our expansion gives us a competitive advantage."
Michael Thorpe (lead director) and Rakesh Ramana (associate director) of Bank of Scotland Corporates Oil & Gas Team said: "We are delighted to be working with Mediterranean Oil & Gas in developing the Guendalina gas field and expanding its portfolio of Italian oil and gas assets. We are already active in the Italian gas market and look forward to being a long term partner as the Company continues to grow its operation."
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