Engagement in Agreement for Sale of Rights in Karish and Tanin
Further to the provisions of Sections 7.7.1 and 7.28.3 of the Partnerships’ periodic report as of December 31, 2015, as released on March 28, 2015, and to the provisions of the immediate report of May 22, 2016 regarding the government’s decision to ratify the Gas Framework, we hereby announce that on August 16, 2016, an agreement was signed between the Partnerships and Energean, in accordance with the terms and conditions determined in the Agreement, the main principles of which are specified below:
- Energean shall purchase from the Sellers all of the rights of the Sellers and of Noble Energy Mediterranean (“Noble”) in the leases I/16 Tanin and I/17 Karish (the “Leases”), in accordance with their holdings as follows: 26.4705% for each one of the Sellers’ rights and 47.059% Noble’s rights (the “Sold Rights” and the “Agreement”, respectively).
- The Buyer shall pay the Sellers the sum total of U.S. $148.5 million (in equal shares between them) which constitutes reimbursement of the past expenses invested in the Leases by the Sellers and Noble, plus royalties in connection with natural gas and condensate that shall be produced from the Leases as follows:
- Payment in cash of $10 million which will be deposited in an escrow account in proximity to the execution of the Agreement and will be remitted to the Sellers on the transaction closing date;
- An additional payment in cash of $30 million will be paid to the Sellers on the transaction closing date;
- The balance of the consideration, in the sum total of $108.5 million, will be paid to the Sellers in ten annual equal installments, plus interest in the mechanism and rate determined in the Agreement, which shall begin on the date on which a final investment decision (FID) shall be made in connection with development of the Leases or on the date on which the sum of the Buyer’s expenses in connection with development of the Leases exceeds $150 million, whichever is earlier;
- The Sold Rights shall be transferred to the Buyer together with the royalties existing in the Leases which each one of the Sellers bore in respect of their original share in the Leases (26.4705% for each one of the Sellers) (the “Existing Royalties”), and accordingly, the duty to pay the same to the royalty holders shall apply from the transaction closing date to the Buyer;
- The Buyer shall transfer to each one of the Sellers a right to royalties in connection with natural gas and condensate that shall be extracted from the Leases at the rate of 3.75% (relative to 100% of the rights in the Leases) before payment of the petroleum profit levy under the Taxation of Profits from Natural Resources Law, 5771-2011 (the “Levy”) in connection with the Leases, and at the rate of 4.125% (relative to 100% of the rights in the Leases) – immediately upon commencement of payment of the Levy (and in total, to the Sellers jointly, at the rate of 7.5% before payment of the Levy and 8.25% after payment of the Levy), net of the amount of the Existing Royalties in relation to the share of such seller in the Leases, as specified in subsection (d) above.
- In accordance with the provisions of the Gas Framework, the Agreement determines that the Buyer shall transfer to the Sellers and to the other Leviathan partners the export quota from the Leases.
- The Agreement includes several conditions precedent, which are mainly receipt of the approval of the Petroleum Commissioner at the Ministry of National Infrastructures, Energy and Water Resources (the “Petroleum Commissioner”) and receipt of the approval of the meetings of the holders of the participation units of the Partnerships1 approving the engagement in the Agreement as aforesaid, or approval of the supervisors, insofar as required under the circumstances.
- The transaction closing date has been scheduled for 3 business days after fulfillment of the conditions precedent. Each one of the parties has been given the right to terminate the transaction in the event that the conditions precedents have not been completed within 45 days from the date of signing.
To the best of the Partnerships’ knowledge, the Buyer is a wholly-owned subsidiary (100%) of Energean E&P Holdings Limited, an oil and gas company registered in Cyprus and active mainly in Greece, which engages in the field of oil and natural gas exploration and production, and acts, inter alia, through subsidiaries owned thereby, as the operator in an oil production project in the Aegean Sea and in other countries, and shall act as the operator in the Leases.