Primeline Secures Funds for China's Offshore LS36-1 Gas Field Development
Primeline Energy Holdings Inc. (Primeline or the Company) disclosed Tuesday that the binding documentation for the project finance facility for the financing of its share of the costs to complete the LS36-1 gas field development (Development) offshore Zhejiang Province, China has now been finalized and was signed by Primeline and the financing banks Nov. 17.
As announced Nov. 7, Primeline, and its affiliate company Primeline Petroleum Corp. (PPC) secured a project finance facility from a syndicate jointly led by China Development Bank (CDB) and China Export and Import Bank (EXIM) with Shanghai Pudong Development Bank (SPDB) as participant and agent bank.
The facility is made available to Primeline and PPC on a joint borrower basis and secured on their respective interests in the Development. The principal amount of the facility is $274 million (of which the Company's share is $205.5 million) which will be repayable over 9 years at an all-in interest rate of 6 month LIBOR+4.7 percent. Following the signing of the documentation, the security arrangements and accounts set up will be implemented with first drawdown expected around the end of November.
China National Offshore Oil Corp. (CNOOC) is the 51 percent owner and operator of the Development. Under agreements signed by CNOOC, Primeline and PPC in 2010, CNOOC has advanced all development costs to date. The loan facility has been put in place in order to finance the obligation of Primeline and PPC to repay their share of the development costs (collectively 49 percent) to CNOOC.
Development trial production, which started in July, has progressed extremely well and has averaged 23.3 million cubic feet per day (MMcf/d) since early September. Once the loan has been drawdown and CNOOC repaid, Primeline and PPC expect to receive a significant amount of income for their shares of the sales revenue which has been generated during the trial production period and which has been held by CNOOC for the account of Primeline and PPC pending repayment. A further announcement will be made when the initial drawdown has been completed.
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