La Cortez Energy and Avante Petroleum have jointly signed a letter of intent for La Cortez to acquire Avante's subsidiary Avante Colombia S.a.r.l. ("Avante Colombia") in exchange for common stock of La Cortez. The purchase will include Avante Colombia's Colombian branch, Avante Colombia Ltd Sucursal.
Avante Colombia currently has a 50% participation interest and is the operator of the Rio de Oro and Puerto Barco exploration and production contracts with Ecopetrol in the Catatumbo area in eastern Colombia. Independent engineering reports on behalf of Avante have estimated a total resource potential of approximately 1.4 MMbbls. (La Cortez has not yet had such reserves audited in conformity with US GAAP.) Under the terms of the letter of intent, La Cortez and Avante will also enter into a joint venture to develop another exploration opportunity in Colombia.
The main terms of the proposed transaction are:
The transaction is subject to legal and financial due diligence by both Avante and La Cortez. The parties have agreed to use their best efforts to sign a definitive purchase agreement by December 18, 2009. If a formal agreement is not signed by the end of the year, the letter of intent will expire unless otherwise extended by mutual agreement of the parties. The letter of intent contains, and the definitive agreement will contain, customary exclusivity provisions and other conditions to closing. It is the intent of the parties to close on or before the end of the year.
Marcel van Poecke, Chairman of the Board of Avante said, "The acquisition of our Colombian subsidiary by La Cortez represents a unique opportunity for our shareholders to further our expansion plans in Colombia, which Avante has long identified as a geographic priority given the country's substantial undeveloped hydrocarbon potential and attractive fiscal and regulatory framework. This strategic transaction with La Cortez allows Avante to partner with a management team and board highly experienced in successfully operating in Colombia. The combination of our existing assets in the highly prospective Catatumbo basin with La Cortez's significant asset base in the Putamayo Basin provides La Cortez with a platform of production and exploration assets. Our confidence in the future of La Cortez and its management team is further underscored by our capital commitment, which will allow La Cortez to aggressively continue to pursue additional development and exploration opportunities."
Andres Gutierrez, President and CEO of La Cortez, commented on the announcement, "We are very pleased to announce this letter of intent, not only for the opportunity to acquire the assets involved and the resource potential to be added to our portfolio, but additionally for the new shareholders that this transaction brings to La Cortez. We expect these very experienced oil and gas executives will provide significant support to La Cortez's continued growth in the region. Avante Petroleum and its shareholders have extensive experience in the oil and gas business globally and in Colombia, and it is the intention of the parties to explore additional joint ventures in the region. We are working to conclude this transaction as soon as practicable."
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