Roxi announced that, together with its partners, its indirect 59 percent owned subsidiary, Galaz Energy BV (GEBV), has agreed to sell a 40 percent interest in the operating company for the NW Konys Field, Galaz and Company LLP ("Galaz"), to the Korean multinational trading company LG International Corp. ("LGI") for US $15.6 million. In addition, LGI will pay US $8.4 million for a 40 percent interest in existing debt of an equivalent value, which will be repayable through future production. LGI will also provide financing to Galaz of up to $26 million for appraisal and development of the NW Konys field. Management considers these funds will be sufficient to finance this project through to commercial production.
GEBV currently has a 73.4 percent interest in Galaz, but as part of the back to back agreements, GEBV will acquire a 24.6 percent of Galaz from its other local partners. Following the sale of 40 percent of its interests to LGI, GEBV will retain a 58 percent interest in Galaz.
As part of the above arrangements, Roxi has varied the terms of the previous agreement with KazRozMunai LLP, announced on the November 19, 2008, such that GEBV will now pay for services provided towards the work program, rather than transferring any equity participation in Galaz to KazRozMunia LLP. Together the above are referred to as the "Galaz Agreements."
The Galaz Agreements are subject to due diligence by LGI and the receipt of certain waivers from the regulatory authorities. However, if the Galaz Agreements are completed as expected by Roxi management, the company will retain an indirect 34.2 percent participating interest in Galaz, and be provided with approximately US $10 million funding available for other assets.
David Wilkes, CEO of Roxi Petroleum said, "Completion of the Galaz agreement with LGI will mark a turning point for Roxi. Not only would we retain a meaningful interest in this producing asset, but we would secure substantial funding of its work program commitments. This together with our recent completion of our farm-out deals with Canamens puts Roxi in a strong position to develop its existing assets and achieve production by the end of the year."
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