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Emperor Oil Signs MOU with State Petroleum for Block 7

Source: www.gulfoilandgas.com 9/23/2012, Location: Africa

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Emperor Oil Ltd. (Emperor) announces that it has entered into a Memorandum of Understanding (MOU) with State Petroleum Overseas Inc., (State) to acquire 85% of their 50 % working interest in a late stage oil development project located in Block 7 in Sudan to develop the three discovered oil fields. ‘SUDAPET’ (Sudan’s state oil company) has the remaining 50% interest in the project and is the Company’s joint partner.

The Significant Terms of the MOU are:

* an initial cash payment to State equal to USD $400,000
* the issuance to State of that number of common shares of Emperor (the “Emperor Shares”) equal to 19.99% of the then outstanding Emperor Shares, after giving effect to such share issuance, to a maximum of Sixty Million (60,000,000) Emperor Shares (which will be subject to a 4 month hold period under the requirements of the TSXV and any additional escrow requirements of the TSXV);

The following cash payments to State:

* i. upon execution of an Exploration and Production Sharing Agreement (EPSA) with the Republic of Sudan: USD $ 1,000,000;
* ii. upon spudding of the first well on Block 7: USD $ 750,000;
* iii. on the first day of the month following the month of declaration of commercial production as per EPSA: USD $ 750,000;
* iv. on the first day of the month following the month in which total production of Block 7 exceeds 2,000 BOE: USD $ 750,000

Emperor will provide, for and to the satisfaction of the Government of Sudan and State, on or before October 8, 2012, evidence confirming Emperor’s ability to pay its share of the initial Project costs; such share of the Project costs being up to US$15 million which includes a US$9.5 million bank guarantee to be furnished Seven (7) days prior to the signing of the EPSA. The remaining US$5.5 million will be used to pay EPSA signing bonuses and any other required fees and other expenses including the work program until December 31, 2012.

The parties hereto agree that they shall negotiate and enter into such further agreement or agreements on or before October 12, 2012 as may be required to give effect to this MOU and that such further agreement or agreements shall include all of the terms of this MOU. State further agrees to, as soon as reasonably practicable following the execution of this MOU, make available to Emperor all information in State’s possession for the preparation of an independent geological report in compliance with the requirements of National Instrument 51-101 which report shall be filed with the TSXV.

Block 7 is a concession on which a previous operator incurred several tens of millions of dollars in expenditures; including 6,071 km of 2D seismic, 430 sq. km of 3D seismic and 3 discovered oil fields. Emperor plans to bring Block 7 to production by the first quarter 2013. In addition to the existing discoveries, the extensive 3D and 2D seismic coverage has identified a number of additional development and exploration targets. The Company plans to initially ship the oil by truck while completing a 60 km pipeline tie-in to an existing central processing facility located on the concession which is connected to the export pipeline to Port Sudan.

Lutfur Khan, Chairman of State says: “We look forward to working with Emperor to fully develop the significant oil resource located in Sudan’s Block 7”. Andrew McCarthy, President & CEO of Emperor Oil states that “This agreement is a significant step towards Emperor Oil’s goal of becoming an international oil producer”.

Concurrent with this announcement, Emperor Oil Ltd. is proposing a non-brokered private placement of up to 40,000,000 units (the “Units”) at a price of $0.50 per Unit for gross proceeds of up to $20,000,000 (the “Offering”). Each Unit will consist of one (1) common share of the Company and one half of one (1) common share purchase warrant (a “Warrant”). Each whole warrant will entitle the holder thereof to purchase one common share of the Company at a price of $0.75 for a period of six months from the closing of the Offering. If the volume weighted average trading price of the common shares on the TSX Venture Exchange (the “Exchange”) exceeds $1.50 for a period of 10 consecutive trading days, the Company may, within 5 days after such an event, provide notice to the Warrant holders of early expiry and thereafter, the Warrants will expire unless exercised on the date which is 30 days after the date of such notice.

The Units will be made available by way of a private placement exemption to accredited investors (as such term is defined in National Instrument 45-106 – Prospectus and Registration Exemptions) in Canada and to certain other qualified investors as the Company may agree.

All securities issued in connection with the Offering will be subject to a statutory hold period of four months plus a day from the date of issuance in accordance with applicable securities law legislation. The Company may pay a finder’s fee on the Offering in cash, common shares, Warrants, or a combination thereof, in the maximum amount permitted by the policies of the Exchange.

The net proceeds from the Offering will be used by the Company to continue its funding obligations under the aforementioned MOU, as well as Farm-In commitments for the Emperor’s Turkish properties, and for general administration purposes.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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