Artumas Executes Farm-Out of Tanzanian, Mozambique Assets

Mnazi Bay, Tanzania
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Artumas has announced that the farm-out of its Mnazi Bay Production Sharing Agreement (PSA), its Area 1 Offshore Rovuma Block and its Onshore Rovuma Block as referenced in its press releases of July 22, 2009 and August 18, 2009 have been executed. Artumas will now seek host government and partner approval of the transfers contemplated by the documents. The commercial terms between the parties include:

Mnazi Bay, Tanzania

Les Etablissements Maurel & Prom SA (M&P) will farm-in to a 38.22% participating interest in all Petroleum Operations save for Exploration Operations where M&P will take up a 47.775% participating interest, the difference being due to Tanzanian Petroleum Development Corporation's (TPDC) 20% participating interest in all but Exploration Operations. Cove Energy plc (Cove) will farm-in to a 16.38% and 20.475% respectively in Petroleum Operations and Exploration Operations. Artumas' participating interests will thus become 25.4% and 31.75% respectively in Petroleum Operations and Exploration Operations. Artumas' share of costs for a 200 sq. km. 3D seismic program and an exploration well will be carried by M&P and Cove. In the event that a 3D seismic program does not take place, M&P and Cove will carry Artumas for an alternative exploration or appraisal program of equal cost to the seismic program.

Artumas also may elect that M&P and Cove will fund Artumas' share of either of two appraisal wells, in which case a further 5% participating interest in Petroleum Operations will be assigned to M&P and Cove per well.

M&P will assume operatorship of all Petroleum Operations under the PSA and accordingly will undertake to fulfill the arrangements currently in place for the supply of gas to the Mnazi Bay Gas to Electricity Project.

Offshore Area 1 Rovuma Block, Mozambique

Cove will acquire Artumas' entire 8.5% participating interest in the Block and will accordingly assume all costs associated with Artumas' participating interests from the effective date of July 1, 2009. Artumas will in consideration receive a royalty amounting to 6.4% of Cove's profit petroleum accruing to the 8.5% participating interest. Should Cove pay further cash calls prior to completion of the transaction, Artumas' royalty will reduce by 0.5% per $1m of expenditure subject to a floor of 4% of Cove's profit petroleum.

Onshore Rovuma Block, Mozambique

M&P and Cove will respectively farm-in to a 24% and 10% participating interest in the Block. Artumas' participating interest will thus become 15.3%. Artumas' share of costs for the one exploration well that is an obligation well under the Exploration and Production Concession Contract will be carried by M&P and Cove. Should M&P and Cove pay further cash calls prior to completion of the transaction, Artumas' participating interest will reduce by 1% per $1m of expenditure subject to a floor of a 10% participating interest.

In addition to the farm in considerations mentioned above Artumas will receive a total cash consideration amounting to $10.98m for the three transactions. All three transactions are subject to the approval of the relevant government entities and joint venture partners. In addition, approval by Artumas' Bondholders is required and a Summons Letter will be posted shortly to Bondholders calling a meeting to approve the transaction as required by the instrument governing the Bonds. A further condition precedent is that Cove's shareholders approve and Cove's new shares are admitted to the London Stock Exchange by 30 October 2009.

Cam Barton, Artumas CEO stated, "This transaction has the capacity to transform Artumas from a position of distress to one where the company will be carried through very significant exploration programmes in all of its assets which have a reasonable chance to materially add value through exploration success. At the same time the transfer of operatorship in the Tanzanian PSA to M&P will reduce overheads whilst maintaining the obligations of the PSA joint venturers to supply gas to the Mnazi Bay power plant which Artumas will continue to run."


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