Canamens BNG Funding Announcement

RNS Number : 2531C

Roxi Petroleum Plc

03 March 2011

 



For immediate release                                                                                                         3 March 2011

Roxi Petroleum plc

Canamens BNG Funding Announcement

Introduction

Canamens BNG B.V. ("Canamens") has informed Roxi Petroleum that it will not make the final payments of, in aggregate, $11,975,926 due under the second stage of the sale and purchase agreement in connection with BNG Ltd llp ("BNG") approved by Roxi shareholders in November 2009 (the "SPA"). As a consequence the Roxi board believes that, under the terms of the SPA, Canamens will forfeit approximately a 6.25 per cent interest in the BNG Contract Area to Roxi.

As a result, Roxi's interest in the BNG Contract Area is expected to increase from 23.41 per cent to 29.66 per cent and Canamens holding is expected to decrease from 35 per cent to 28.75 per cent, subject to receipt of the necessary government waivers under Kazakh law. Unless otherwise agreed, all shareholders, including Canamens, remain liable to meet the costs of future developments at BNG on a pro rata basis to their participating interests.

Background

 Roxi acquired a 58.41 per cent interest in BNG, and accordingly the BNG Contract Area, in March 2008, when it acquired 59 per cent of Eragon Petroleum Limited ("Eragon") from Baverstock GmbH ("Baverstock"), a company controlled by Kuat Oraziman, a director of Roxi and its largest shareholder.

In January 2009, Roxi entered into the SPA (as subsequently amended) with Canamens to sell, in aggregate, 35 per cent of BNG held by a wholly owned subsidiary of Eragon, BNG Energy BV, in two stages. It was agreed between Baverstock and Roxi that such sales would be out of the 58.41% Roxi interest in BNG, leaving Baverstock with an effective 40.59% interest in BNG irrespective of the transfers of interests to, or from, Canamens. Under the SPA, Canamens acquired a 23 per cent interest in BNG, in return for a $32 million funding commitment plus a cash payment of $2 million . Under the SPA, Canamens was granted an option to invest a further $23 million in return for a further 12 per cent interest in BNG ("Stage 2 Farm-out"). In March 2010, Canamens exercised its option under the Stage 2 Farm-out.

To date Canamens has met initial cash calls under the terms of the Stage 2 Farm-out of, in aggregate, some $9 million.  An approved cash call of $1.7 million has not been met and the balance remaining under the Stage 2 Farm-out is $10.28 million.

Impact on the development of BNG

In the short term Canamens' decision not to advance the funds for BNG will have little operational impact as much of the seismic acquisition and processing work has been completed and the publication of an audited portfolio of BNG prospectivity is expected in Q2 2011.

Clearly the longer term development of the BNG asset will require additional funding. Roxi together with Baverstock, who between them would own some 70.25 per cent of the BNG asset will, in due course, seek to raise additional funding from industry sources.

Commenting on the announcement, David Wilkes, CEO said:

"We have been aware that Canamens shareholders have been conducting a strategic review of its operations.  It is disappointing that Canamens has decided not to invest the full consideration under the agreed terms of the existing sale and purchase agreement."

Commenting on the announcement, Jan Kielland, CEO of Canamens said:

"As a result of Canamens' portfolio strategy the company has decided to refocus its resources. The consequence of this is to crystallize our interest in BNG to 28.75% in accordance with the agreement with Roxi Petroleum.

We are looking forward to working in an optimal way alongside our partners to explore and develop the hydrocarbon potential in the BNG block."

Enquiries

Roxi Petroleum plc

David Wilkes CEO                                                                                                            [phone]

Matrix Corporate Capital LLP (NOMAD and broker)

Louis Castro / Tim Graham                                                                                           [phone]

Buchanan Communications (Financial PR)

Tim Thompson / Ben Romney / Chris McMahon                                                [phone]

 

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