Pacific Asia Petroleum has signed a comprehensive Amended & Restated Agreement on Cooperation with Well Lead Group Limited covering the principal terms and conditions for the acquisition by Pacific Asia Petroleum, Inc. of 51% participating interests in several Well Lead related companies conducting onshore oil production and enhanced oil recovery technology operations in the People's Republic of China.
On September 30, 2008, the Company entered into an Agreement on Cooperation (the "AOC") with Well Lead pursuant to which the parties agreed to carry out due diligence and negotiate a mutually acceptable Sale and Purchase Agreement for the acquisition by the Company of up to 39% of Well Lead's interests (the "WL Interest") in Northeast Oil (China) Development Company Ltd. ("Northeast Oil"). Northeast Oil owns a 95% interest in oilfield blocks Fu710 and Meilisi723 in the Fulaerjiqu Oilfield in Qiqihar City, Heilongjiang Province in the People's Republic of China (the "WL Oil Blocks").
After completing the initial phase of due diligence on Well Lead, the WL Interest and the WL Oil Blocks, the Company commenced additional negotiations with Well Lead and other related parties to expand the potential acquisition to include other Well Lead interests and related parties. These additional Well Lead interests and related parties include contracts covering additional producing oilfields in China, a Well Lead-affiliated technology company that has been applying its intellectual property to successfully enhance production in the WL Oil Blocks (and other oil fields in China), and certain Well Lead related venture companies. Following additional due diligence review and negotiations with Well Lead, the Company decided to pursue the acquisition of a 51% participating interest in all these Well Lead assets and related parties, and the Company and Well Lead have signed the Amended & Restated Agreement on Cooperation covering the principal terms and conditions of these acquisitions. The Company anticipates that the total purchase price for all these Well Lead interests to be acquired by the Company will be less than the amounts originally provided for in the AOC for the WL Oil Blocks alone. The Company has commenced phase two of its due diligence review with a goal of concluding such review, negotiation of definitive documentation, and conclusion of the anticipated acquisitions by April 30, 2009.
Commenting on the revised agreement with Well Lead, Frank C. Ingriselli, President & CEO of Pacific Asia, said, "We are excited about this opportunity to expand the scope of our previous agreement with Well Lead. In this challenging time in the financial markets, we believe that this type of venture that minimizes cash expenses and capital exposure, yet provides even more upside and immediate cash flow, is the right way to go for Pacific Asia. This series of acquisitions can provide royalties from several onshore oil fields covering hundreds of wells, while at the same time giving us the ability to utilize this newly acquired technology to enhance production in fields throughout all of China (and elsewhere in Asia). We expect that this will provide a great framework for lost cost early production operations. These companies are already actively engaged in these activities and are generating revenues. These are the type of ventures that we believe fit well into Pacific Asia's strategy and will help to deliver on our company's business plan and grow shareholder value."
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