Canadian Overseas Petroleum Limited ("COPL"), an international oil and gas exploration and development company focused on offshore Africa, is pleased to announce that its 50% owned joint venture company, Shoreline CanOverseas Petroleum Development Corporation Limited ("ShoreCan"), has executed definitive agreements with Essar Exploration & Production Limited (Mauritius) ("Essar Mauritius") to resolve their disputes as outlined in the agreement in principal announced by the Company on June 4th 2020. ShoreCan and Essar Mauritius have entered into a Sale and Purchase Agreement, and other agreements, with each other concerning, among other things, their respective obligations under the Essar Exploration and Production Limited (Nigeria) ("Essar Nigeria") Shareholders Agreement (the "Shareholders Agreement").
The agreements between ShoreCan and Essar Mauritius can be summarized as follows:
- A Settlement Agreement which settles the claim filed by Essar Mauritius against ShoreCan in the High Court of Justice of England and Wales. Under the Settlement Agreement, each party has agreed to bear their own costs and end the proceedings in the High Court of Justice of England and Wales
- A Share Transfer Agreement in which ShoreCan will return 70% of the shares in Essar Nigeria to Essar Mauritius
- An amended Shareholders Agreement, the highlights of which as follows:
o Essar Mauritius to carry ShoreCan for a 10% carried interest (capped at US$5 million net) on all costs relating to the drilling of the first Well to be drilled under the terms of the OPL 226 PSC
o ShoreCan will have the option to increase its shareholding in Essar Nigeria from 10% to 30% by paying 20% of historic expenditures of Essar Nigeria at cost through the drilling of the first well. The option is exercisable within 90 days from the completion of the first well as defined in the final well plan as approved by concessionaire (NNPC) and regulator (DPR) under Phase 1 of the OPL 226 Production Sharing Contract (PSC)
o The Essar Nigeria Board of Directors and management team to be restructured commensurate with its amended share structure to reflect the increased shareholding of Essar Mauritius
- A Loan Agreement with Essar Nigeria whereby Essar Nigeria recognizes historic expenditures by ShoreCan on behalf of Essar Nigeria as a shareholder loan, thus allowing ShoreCan to recover these expenditures, cost recoverable and non-cost recoverable, from future production revenue
Essar Nigeria, with the full support of its shareholders, has applied to the concessionaire and the regulator for an extension of the exploration period under the OPL 226 PSC beyond the current term ending September 30, 2020. Completion of the definitive agreements outlined above is subject to the grant of such an extension and other customary completion conditions.
Arthur Millholland, President and CEO, commented:
"The execution of these definitive agreements is the first step in the transformation of the Company. This is a tremendous asset and our interest in it is appropriate for this time in the business cycle. Going forward there are opportunities available to COPL at low entry costs as a result of the drop in oil prices due the COVID-19 pandemic. We are evaluating these with the view of adding opportunities which offer near term production and cash flow with good economics during this period of low oil prices."