Continental Energy has terminated its agreement with Ernst & Young, acting in its capacity as receiver for insolvent Fuel-X International Ltd., for the acquisition of a 30% interest in the Tungkal PSC onshore Sumatra, Indonesia.
Under the terms of a settlement agreement approved by the Court of the Queen's Bench of Alberta, Canada; Continental has received a refund of $500,000 plus accumulated interest on a $1,500,000 deposit Continental made upon signature of the original acquisition agreement. Ernst & Young will keep $1,000,000 on behalf of the creditors of Fuel-X International Inc. as a break- up fee.
Continental CEO, Richard L. McAdoo, said of the termination, "Closing of this deal has been long delayed due to difficulties in satisfying certain contractual pre-conditions to closing, which were largely attributable to third party interests and were beyond our control. With these delays, the rigid structure of the Fuel-X insolvency process, and the world economic climate, we were unable to renegotiate our purchase agreement upon revised terms and conditions acceptable to us. Since the August 1, 2008 signature of the deal, oil prices have fallen dramatically and the oil production rate from the Tungkal Block has also fallen by 50%. The net result of these two factors means that we would not have been in a position to make the loan repayments to our bankers that closing this deal would require. We remain interested in acquiring an interest in the Tungkal property. Terminating the Fuel-X deal now clears the way for us to pursue other acquisition alternatives upon more favorable terms."
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