Mediterranean Oil & Gas announced today that its wholly owned subsidiary, Phoenicia Energy Company Limited has entered into a conditional farm-out agreement with Genel Energy Plcin for oil exploration in Area 4 Offshore Malta.
Genel is to acquire 75% of PECL's interest in its Area 4 Offshore Malta Production Sharing Contract for a US$10 million cash payment.
It will also get 100% 'carry on' the first exploration well, which is planned to be drilled to a minimum depth of 2,500 metres, 100% carry on the second exploration well up to a maximum of US$30 million gross expenditure.
At PECL's option, should the costs of the second well exceed US$30 million, Genel is to provide a financing arrangement to fund PECL's 25% share of any additional expenditure, at an interest rate equivalent to 3 Month Libor plus 400 bps.
ECL is to remain as operator until completion of the first exploration well, at which time Genel can elect to become the operator, or at such later date as the parties may agree.
Mediterranean oil and Gas has also signed an Area of Mutual Interest agreement with Genel to cooperate in acquiring exploration and production assets in the offshore basins of Libya, Tunisia and Malta for a minimum term of three years.
The proposed Malta Transaction, targeted by the parties to be completed by the end of October 2012, is conditional upon receipt of approval by the Maltese Minister for Resources and Rural Affairs, together with the grant of a minimum one year extension of the first phase exploration period of the Malta Area 4 licence.
Dr. Bill Higgs, Chief Executive of Mediterranean Oil and Gas, commented:
"I am very pleased that we have been able to secure such a high quality and substantial partner as Genel to progress the exploration of Area 4 Offshore Malta with the drill bit. Genel has an excellent track record in international oil and gas exploration and development. We are excited about the opportunities within the frontier acreage of Area 4 and we are moving ahead with the planning of the first exploration well."