Rocksource Inks Deal to Sell US Onshore Assets
Rocksource's US subsidiaries have signed a Letter of Intent (LOI) for the sale of its US onshore producing gas fields for a consideration of US $9.35 million with effective date November 1, 2010. The sale is subject to certain conditions, including the signing of a final Sales and Purchase Agreement (SPA).
CEO Trygve Pedersen commented; "Drilling high potential offshore exploration wells is our core business. A sale of the US onshore assets will allow Rocksource to focus the business, reduce our cost base and strengthen the financial position ahead of our upcoming drilling campaign embarking in the next quarter."
The US onshore assets consist of gas producing fields in San Jacinto and Polk Counties, Texas and are owned through Rocksource's subsidiaries Rocksource Energy Corporation (REC) and Sandhawk Energy LLC (SHK). The fields are on a natural decline and have been classified as non-core by Rocksource. A sale of these assets would allow the company to re-allocate proceeds into its core business; drilling high potential EM positive offshore exploration wells.
The US onshore assets were important in the build-up phase of Rocksource, assisting the company in growing its core business. Due to declining production coupled with a significant drop in US gas prices, the US assets have become increasingly marginal to the company. Rocksource expects an estimated gain on the transaction of approximately US $600,000.
Rocksource has a NOK 200 million bond maturing in May 2012 which has security in the US onshore assets. A final SPA is amongst other subject to the bondholders accepting to release pledge of security in REC/Sandhawk assets and shares in the two subsidiaries. As compensation Rocksource will amongst other redeem approx. 7 per cent of the outstanding bond, equivalent to 25 per cent of the gross proceeds from the sale. A bondholders meeting will be called for on or about 19 November 2010 to vote for the proposed changes to the Loan Agreement. Rocksource has already received pre-acceptance from some of the larger bondholders. The proposal will become effective upon a successful sale of the US onshore assets.