VANCOUVER, May 28, 2019 /CNW/ - CruzSur Energy
Corp. (the "Company" or "CruzSur") (TSXV: CZR), is
pleased to announce that the disputes with the counterparties in
the Company's original acquisitions of economic beneficial
interests in the Sinu-9 Block and Tiburon Block have been resolved
and that terms for a new farmout agreement for the SN-9 Block have
been agreed to with Panacol Oil & Gas ("Panacol").
In August 2018, the Company
received a letter from Clean Energy Resources S.A.S
("Clean") as party to the Purchase and Sale Agreement for
the SN-9 Block ("SN‑9 PSA") pursuant to which
the Company initially received its 80% economic beneficial interest
in January 2017, alleging that the
Company was in breach of certain obligations under the SN‑9 PSA and
that as a consequence the SN‑9 PSA was immediately terminated. The
Company also received an identical letter from ColPan Oil & Gas
Limited ("ColPan"), as counterparty to the Purchase and Sale
Agreement for the Tiburon Block ("Tiburon PSA") by which the
Company initially received its 60% economic beneficial interest in
February 2017, alleging that the
Company was in breach of certain obligations under the Tiburon PSA
and that as a consequence the Tiburon PSA was immediately
terminated. The Company refutes that either of these claims have
any merit, however, it engaged with the counterparties in order to
find a resolution to the dispute.
The outcome of these discussions is that the Company has agreed
to terms with the counterparties whereby each party will continue
forward with the original SN-9 PSA and Tiburon PSA, respectively,
with certain amending terms which are outlined below.
Resolution terms for SN-9 Block with Clean
- Clean's participation in the SN-9 Block will increase from a 5%
to a 13% interest reducing the Company's share from 80% to 72%,
which will comprise two components:
- First component - the original carried working interest will
increase by 3%, from 5% to 8%
- Second component - Clean will acquire an additional 5% by one
of two options:
-
- Option 1 - payment of US$1.2
million to the Company if Clean chooses to only participate
in the first phase of the exploration program.
- Option 2 - payment of US$2.9
million to the Company if Clean chooses to participate in
both phases of the exploration program.
Payment to the Company for either
option will be received through the sale of 62.5% of Clean's
production on the SN-9 Block corresponding to this 5% interest.
Furthermore, the share of Net Profit Interest and Overriding
Royalties (as defined in the SN-9 PSA) related to this additional
5% working interest will be the obligation of Clean and not carried
by the Company
Resolution terms for Tiburon Block with ColPan
- CruzSur will earn its economic beneficial interest based on the
executed work program as follows:
-
- 10% working interest on the completion of the Phase 3 3D
seismic commitment
- An additional 15% working interest on the drilling and testing
of one exploration well
- A further 15% working interest on the drilling and testing of a
second exploration well
- After completing the 3D seismic commitment, CruzSur is not
obligated to drill any of the exploration wells and can exit the
contract with no further commitments, but will lose the
US$310,000 performance guarantee
currently held in deposit with the Colombian National Hydrocarbon
Agency ("ANH"); alternatively, CruzSur may elect to stay in
the license with a 10% working interest.
- CruzSur will cover, in the form of a loan, unpaid management
fees of US$120,000 arising from the
dispute period. This money will be returned to CruzSur if the
Company is still participating in the block when the ANH
performance guarantee is returned at the end of the Phase 3
commitment.
- In the event that CruzSur does not fulfill the Phase 3
commitment, except for reasons beyond its control, CruzSur will
cede a 1.5% carried working interest in the SN-9 Block to Colpan,
and forfeit the aforementioned US$120,000 loan.
Non-Binding Letter of Intent for Panacol to Farm-in to the
SN-9 Block
In parallel with resolving the above mentioned dispute,
the Company has also negotiated terms for a farmout agreement
with Panacol on the SN-9 Block through a non-binding letter of
intent, the details of which are as follows:
- Panacol is to finance the ANH Phase 1 minimum exploration
commitment of US$22.3 million through
the provision of services at market rates.
- CruzSur will reimburse Panacol for its portion of these costs
("SN-9 Investment Costs") out of 60% of its share of any
commercial production realized from the SN-9 Block, after deduction
of costs, royalties and Net Profit Interest.
- Panacol will share equally in the revised terms required to
resolve the SN-9 dispute with Clean.
- Panacol will acquire a participating interest of 36% upon
completion of the ANH Phase 1 commitments.
- Additionally, Panacol and their Seismic investor will finance
the acquisition of 70km2 of 3D seismic on the Tiburon
block through services up to a value of US$5
million and, upon completion of the commitment, will receive
an additional 1.5% working interest in the SN-9 Block coming from
CruzSur's 36% working interest. The seismic acquisition costs are
to be paid by CruzSur out of 60% of its commercial production from
the SN-9 Block after costs, royalties and Net Profit Interest.
- Panacol will be entitled to receive the US$2.4 million ANH performance guarantee when
returned by the ANH upon completion of the Phase 1
commitments.
- Panacol will recognize past costs of US$600,000 which are to be deducted from the SN-9
Investment Costs to be repaid by CruzSur out of commercial
production.
- Panacol and CruzSur will share the SN-9 PSA commitments
proportionally relative to their respective working interests, and
will include:
-
- Carry of Clean for Phase 1 exploration commitments as defined
in ANH contract.
- Should the parties elect to proceed to Phase 2, carry of Clean
for the Phase 2 exploration commitments as defined in the ANH
contract.
- Net Profit Interest of US$6.5
million to be paid out of 60% of production share.
- Overriding Royalty of 6% to be paid to Clean.
- Expenditures outside of the minimum work commitment will be
divided between the parties in proportion to their participating
interest.
- Upon acceptance of the non-binding letter of intent, the
Parties will complete a definitive Farmout Agreement
Following execution of the above agreements between Clean,
ColPan and Panacol , the participating interests of the respective
parties in the SN-9 Block will be as follows:
- CruzSur
34.5%
-
Panacol 37.5%
-
Clean 13%
-
Oleum
15%
About CruzSur Energy Corp.
CruzSur Energy Corp. is a publicly traded E&P company
focused on proven oil & gas plays in Latin America. The Company holds a large
diversified portfolio of producing, development and unexploited
assets in Colombia and
Argentina where it will leverage
its amplitude of technical expertise and proven track record
building companies and creating value.
Complete reports and statements are available on SEDAR at
www.sedar.com and on the Company website www.cruzsur.energy
Forward-Looking Information
Except for the statements of historical fact, this news
release contains "forward-looking information" within the meaning
of the applicable Canadian securities legislation that is based on
expectations, estimates and projections as at the date of
this news release. More particularly, this press
release contains statements concerning (i) the settlement of
outstanding disputes with Clean and ColPan, (ii) drilling plans,
(iii) expected rates of production, (iv) the resulting cash flow
from added production, (v) changes in the working interest of
various parties to the SN-9 PSA and the Tiburon PSA, (vi) the
payment of various amounts to various parties to the aforementioned
transactions, and (vii) exploration and seismic commitments. The
forward-looking statements contained in this document are based on
certain key expectations and assumptions made by the Company,
including expectations and assumptions concerning the success of
future drilling and development activities, the performance of
existing wells, the performance of new wells, the successful
application of technology and prevailing commodity
prices.
Although the Company believes that the
expectations and assumptions on which the forward-looking
statements are based are reasonable, undue reliance should not be
placed on the forward-looking statements because the Company can
give no assurance that they will prove to be correct. Since forward
looking statements address future events and conditions, by their
very nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to, risks associated with the oil and gas industry in
general (e.g., operational risks in development, exploration and
production; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses, and health, safety and
environmental risks), commodity price and exchange rate
fluctuations and uncertainties resulting from potential delays or
changes in plans with respect to exploration or development
projects, capital expenditures or governmental policies and
regulations.
Any forward-looking information speaks only as of the date on
which it is made and, except as may be required by applicable
securities laws, the Company disclaims any intent or obligation to
update any forward-looking information, whether as a result of new
information, future events or results or otherwise.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE CruzSur Energy Corp.