Tullow to Farm-In Kenya Block
Centric and Tullow have executed the definitive farm-in and joint operating agreements whereby Tullow will farm-in to a 50 percent participating interest in Centric Energy's 100 percent owned Production Sharing Contract covering Block 10BA in north-western Kenya (the "PSC"). The closing of the farm-in is conditional upon the approval of the Kenyan Government and satisfaction of conditions precedent which are expected to be completed within 30 days.
Pursuant to the agreements, Tullow will earn a 50 percent participating interest in the PSC and will assume operatorship in return for:
- reimbursing 50 percent of Centric Energy's acquisition costs for the PSC which total approximately US $750,000;
- paying 80 percent of the first US $30 million of expenditures under the PSC; and
- assuming 80 percent of the bank guarantees and parent company guarantees during the period in which it is paying 80 percent of the expenditures under the PSC.
"Centric Energy is very pleased to have the opportunity to work with Tullow Oil on the exploration of Block 10BA," said Alec Robinson, President & CEO of Centric Energy. "Tullow's success and expertise in a similar geological setting in Uganda will ensure that Block 10BA is explored using the most modern exploration technology and in accordance with recognized international environmental standards and principles. Centric Energy intends to participate fully with Tullow in the exploration program."
In addition to the approval of the Kenyan Government, another condition precedent to the closing of the farm-in is the resolution of a judicial review application filed against Kenyan Ministry of Energy relating to certain exploration permits granted by the Ministry, including the Company's PSC.
In the court proceedings, which were brought by Interstate Petroleum (IPL) against the Permanent Secretary, Ministry for Energy, IPL is seeking a judicial review of the administrative process that led to the issuance of exploration permits in respect of Block 10BA, among others, which resulted in Centric Energy being a named party to the proceedings. A preliminary order, granting IPL leave to seek orders against the Permanent Secretary, has been granted and a hearing date has been set for October 27, 2010. Centric Energy has been advised by its legal counsel in Kenya that the courts in Kenya regularly grant this sort of preliminary order, also known as "granting leave", in applications of this nature as there is no requirement to establish the merit of the claim on the initial application.
The Ministry of Energy has advised the Company that it can carry on with its work program and that its PSC remains in good standing.
Alec Robinson stated, "Centric Energy believes there is no basis for the claims that IPL is making against the Permanent Secretary. We understand that both the Permanent Secretary and the Ministry of Energy share our view in that regard. Centric Energy will work closely with the Permanent Secretary, the Ministry of Energy, the Attorney General's office and other interested parties to ensure that our interest in the Block is safeguarded."
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