COPL, Shoreline Closer to Unlocking OPL 226 With Receipt of Project Financing Term Sheet

Canadian Overseas Petroleum Limited (“COPL” or the “Company”) (XOP: TSX-V) & (COPL: LSE), an international oil and gas exploration and development company, is pleased to announced that its 50% owned joint venture company, Shoreline Canadian Overseas Petroleum Development Corporation (“ShoreCan”), has received and agreed to a project financing and offtake agreement term sheet (the “Term Sheet”), providing for a minimum US$30 million to a maximum of US$50 million Senior Secured Facility (the “Facility”), for investment by ShoreCan into its 80% owned affiliate Essar Exploration and Production Limited (Nigeria) (“Essar Nigeria”) from The Mauritius Commercial Bank Limited (“MCB”) and Trafigura PTE Ltd. (Trafigura”).

The Facility would provide funding for all production related expenditures following the drilling and testing of the initial production well to be drilled by Essar Nigeria on its 100% contracted interest in OPL226, which is located in shallow to mid-water offshore Nigeria. Drawing on the Facility is contingent on among other things:

An additional US$20 million to US$33 million of funding from ShoreCan; US$100 million funding from an offshore oil services group (“Service Provider”) to deliver the project;

A minimum of 6,000 bbl./d production rate averaged over 20 days; The execution of a formal definitive binding agreement between the parties. Other material terms of the proposed Facility include the following: Two-year term to maturity; and a grant to the lenders of US$3 million worth of warrants to purchase COPL common shares for two years with an exercise price equal to the market price of the COPL common shares on the date of closing of the Facility.

The project as planned involves the drilling and completion of a horizontal oil production well offsetting the 2001 NOA#1 oil discovery well and the drilling and completion of two (2) to three (3) additional high angle oil production wells in the adjacent NOA East fault block from a common wellhead platform, and placing these wells on production in an approved early production scheme. Essar Nigeria has prepared a work program for this initial campaign on OPL226 in the form of a field development plan (“FDP”) for submission to the Concessionaire, NNPC. The Company expects the presentation of the FDP to NNPC to occur in the near term.

ShoreCan is in late stage discussions with the Service Provider, which involve the provision of drilling services, the supply of a mobile production unit and a storage vessel for a deferred fee. The Company will provide updates on these discussions in due course.

As part of the transaction, the Term Sheet provides for Essar Nigeria to enter into a crude oil offtake arrangement with Trafigura.

Cofarco SAS (“Cofarco”) of Paris is engaged as Financial Advisor to the Company for the project financing.

Arthur Millholland, President and CEO, commented: “The Company and Shoreline through our jointly held affiliate have worked hard to achieve this first step in the unlocking of the resource within OPL 226. We are confident that we will complete the process to enable Essar Nigeria to commence this first phase of development operations.”


Source: EnergyMixReport

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