Rheochem to Purchase Remaining 50% Interest in Zeus Petroleum
Rheochem has signed a 90 day option agreement with Pacific International Management (PIM) to purchase its 50% shareholding in Zeus Petroleum Limited (Zeus). Exercise of this option would give Rheochem 100% ownership of Zeus. The 90 day period will allow Rheochem to investigate funding opportunities for the increased level of participation in the Athena development.
Zeus has a 10% interest in the Athena development with current 2P reserves attributable to Zeus of 2.97 million barrels of oil. It also has a 100% interest in 5 other North Sea blocks with mid case recoverable prospective resources of over 300 million barrels which it intends to farm-out.
Under the terms of the option agreement, Rheochem will loan up to US $5 million to PIM for its share of future costs for Zeus. If the option is not exercised, the money will be repaid to Rheochem with interest within 60 days of the option period end.
If the option is exercised, Rheochem will issue 16,266,098 new ordinary shares at 16.25p and a convertible note of £2,643,241 exercisable at 16.25p within 2 years. This note will bear an annual interest rate of 10%. Rheochem will also pay the sum of US $1m on approval by the Department for Business, Enterprise and Regulatory Reform of a field development plan for Athena and a further US$1m on production of first oil from the Athena field.
In payment for previous loans of US$10,043,666 owing to PIM by Zeus, Zeus will grant a royalty to PIM from its 10% share of future Athena production equal to $4.00 per barrel for the first 2.5 million barrels, $2.00 per barrel for the next 2.5 million barrels and $1.00 per barrel on any further production.
Commenting on the agreement Haydn Gardner, CEO, of Rheochem said, "This is a great opportunity for Rheochem to potentially increase its stake in the Athena development project and other Zeus North Sea assets whilst retaining its cash position. We will now seek the funding that will be required for the other 5% of the Athena development costs if we decide to exercise the option.
"Whilst we acknowledge the current economic environment, we believe funding is still available for oil and gas projects in a development stage and there are several options open to us which we will announce to the market as soon as is practicable."
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