Adira Energy Ltd. has entered into a series of agreements to farm out 5% of its working interest in its Gabriella license, 10% of its Yitzhak license, and 10% of its Samuel license to reduce the Company’s future financial commitments on the licenses.
2.5% of Adira’s working interest in Gabriella will be carried. The Company also announces that the Ministry of Energy and Water of the State of Israel (the “Ministry”) has granted a further extension of the date for the execution of a drilling contract on the Samuel license offshore.
Farm-Out Agreements
Through its subsidiaries, Adira has entered into a series of agreements with Tohar Hashemesh Ltd. (“THL”) to farm-out part of the Company’s licenses. The Company will be reimbursed for approximately US$1.6 million representing 50% of Adira’s past costs incurred on the licenses. The remaining 50% (approximately $1.6 million) will be paid upon registration of THL’s interest with the Ministry. Additional terms and conditions of the agreements include the following:
The Company will farm out 5% of its working interest in Gabriella, and will be carried for a further 2.5% of its own working interest through to the completion of the first exploration well, including testing. The Company will farm out 10% of its working interest in each of Yitzhak and Samuel. THL has an option to farm into an additional 10% of the Company’s working interests in Yitzhak and Samuel, exercisable on or before March 31, 2013. Until such time, THL will be responsible for the funding obligations in respect of the options. Should THL elect not to exercise the options, Adira will return these funds within six months. THL will also pay Adira a 3% Overriding Royalty Interest (“ORRI”) on THL’s share of revenues from petroleum sold on all the licenses, until repayment of THL’s expenditures in the work program and 4.5% ORRI from that date forward. In the event Adira solicits additional working interest partners into the licenses, THL will reduce its working interest pro rata to the entry of such partner. Closing of the transaction is subject to agreement by all partners in the licenses, registration of charges over certain of Adira’s assets, receipt of payment and other standard closing conditions.
Following approval of the agreements, excluding the options granted to THL, Adira will hold 10% of the Gabriella license (in addition to the 15% back in option), 50% of the Yitzhak license and 31.25% of the Samuel license.
Gadi P. Levin, Chief Financial Officer of Adira Energy stated : “ We are pleased to welcome Dr. Efraim Eligula and his company Tohar Hashemesh as Adira’s partner on our licenses. This transaction is part of our stated goal to leverage the working interests in our licenses to attract new partners who will share in the investment required to prove up these blocks. He joins us during the last phase of our preparations to drill Gabriella during the first half next year, which will be followed by drilling on Samuel and Yitzhak later in 2013.”
[mappress] Press Release, October 29, 2012