San Leon has entered into a joint venture with Al Meinaa Oil Services Limited ("Al Meinaa") for the reciprocal referral and joint evaluation of Oil and Gas projects in the Republic of Iraq (the "Joint Venture").
Al Meinaa is based in Baghdad, Iraq and was established in 2003 to work with international resources and engineering companies and rapidly expanded into the area of reservoir modelling and geological and geophysical studies, providing its services as a local partner to international companies. It has compiled information on numerous fields around Iraq, including the Ajeel, West Qurnah, Mansouria, Akkas and Bani Hassan fields. In February 2009, Al Meinaa, in a joint venture with Petronor Group, signed a 40 year lease for a large land site in Basrah, with South Oil Company for the development of an oil and gas supply base. Its management consists of senior Iraqi engineers.
Under the terms of the Joint Venture, once a potential project is identified by one party, the other party has a right of first refusal to evaluate that project. If such party wishes to review the project further, it shall have a 60 day period of exclusivity to do so, following which the parties shall act in good faith to agree the terms of their joint participation in the project and enter into a shareholders' agreement to further govern that project (and any further projects they agree to jointly participate in) (the "SHA"). The other party has no obligation to review or evaluate any particular project and in those circumstances, or if the parties are unable to agree the terms of their joint participation in a project, the introducing party is entitled to continue with the project without the involvement of the other party (which itself shall be prohibited from participating in the relevant project for a 2 year period).
Following agreement of the parties' joint participation in a project and the execution of the SHA referred to above, San Leon has agreed to issue to Al Meinaa warrants to subscribe for 10 million ordinary shares in San Leon at a price of 22 pence per share. In addition, following the first execution of a production sharing agreement or long term service agreement, San Leon has agreed to issue to Al Meinaa warrants to subscribe for 10 million ordinary shares in San Leon at a price of 22 pence per share. Following exercise of these warrants, Al Meinaa shall not sell its shares for a period of one year. Thereafter any sales shall be conducted through the Company's broker for the time being.
Oisín Fanning, Chairman of San Leon commented, "Iraq represents an incredibly exciting opportunity for San Leon as the country's potential is well documented. With this in mind Iraq has been a region that we have been looking to enter for some time. As such we are delighted that we have been able to secure this exclusive partnership with such an excellent local resource in Al Meinaa. This partnership will help provide access to and evaluation of, the suitable opportunities available to us in Iraq. This partnership is part of a carefully managed strategy to access this market and will enable us to bring our expertise and seismic resource to bear in conjunction with Al Meinaa's local expertise. We look forward to working with them and maximizing the opportunities available to both parties."
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