Friday, September 7, 2012

Mediterranean Oil & Gas: Divestment of non-core assets

Thursday, September 06, 2012

The Board of Mediterranean Oil and Gas Plc (AIM: MOG) is pleased to announce that the Company, through its subsidiaries, Medoilgas Italia SpA and Medoilgas Civita Limited, has entered into a sale and purchase agreement with Canoel International Energy Limited (TSXV:CIL) ("CIL"), to transfer to CIL and/or its nominated subsidiary, MOG's entire working interest in the following 13 non-core exploration and production gas assets onshore Italy (the "Assets"):

MOG operated onshore gas production concessions:

  • Masseria Grottavecchia (WI 20%)
  • San Teodoro (WI 100%)
  • Torrente Cigno (WI 45%)
  • Misano Adriatico (WI 100%)
  • Sant'Andrea (WI 40%)
  • Masseria Petrilli (WI 50%)

Non-operated onshore gas production concessions:

  • Masseria Acquasalsa (WI 8.8%)
  • Lucera (WI 13.6%)
  • San Mauro (WI 18%)

MOG operated gas exploration permit:

Exploration permit applications:

  • Serra dei Gatti (WI 100%)
  • Villa Carbone (WI 50%)
  • Colle dei Nidi (WI 25%)
  • (together, the "Transaction")

The proposed Transaction follows the MOG Board's decision to rationalise the Company's current onshore Italy portfolio by divesting gas production concessions and exploration permits that are no longer considered to be strategic for the growth of the Company's future gas production. The 2P gas reserves, which are to be divested as part of the Transaction, amount to 1.4 Bcf, representing 7.5% of MOG's total 2P gas reserves of 18.4 Bcf. The corresponding gas production that is to be divested is currently 13,800 m3/day, representing approximately 6% of MOG's revenues.

Under the terms of the Sale and Purchase Agreement, on Completion:

  • CIL will pay to MOG the sum of ?100 as consideration for the acquisition of the Company's working interests held in the Assets;
  • CIL agrees to assume the liability for all future plug, abandonment and site remediation costs associated with the Assets;
  • MOG will pay ?1,250,000 to CIL as a partial contribution towards the future plug, abandonment and site remediation costs for the Assets;
  • MOG will credit CIL the revenue MOG received from the Assets during the period between the Effective Date of 24th August 2012 and the Completion Date (the "Interim Period"), net of allowable operating costs and agreed capital expenditure associated with the Assets and incurred by MOG during the Interim Period.

Completion of the Transaction is conditional upon MOG receiving the approval of the Italian Ministry for Economic Development for the transfer of the Assets to CIL, and CIL receiving the approval of the Toronto Stock Exchange (TSXV).

Following completion of the Transaction, MOG retains its interest in the following on-shore Italy gas production concessions:

  • Castel di Lama (WI 26% OP)
  • Fornovo di Taro (WI 21.4%)
  • Monteardone (WI 11%)
  • Monte Verdese (WI 60% OP)
  • San Basile (WI 100% OP)
  • Scanzano (WI 100% OP)
  • Torrente Celone (WI 50% OP)

In addition, MOG retains its interest in the following on-shore Italy exploration permits and exploration permit applications:

Exploration permits:

  • Civita (WI 100% OP)
  • Serra San Bernardo (WI 22.89% OP)
  • Torrente La Vella (WI 40%)

Exploration permit applications:

  • Agnone (WI 100% OP)
  • Corropoli (WI 100% OP)
  • Masseria La Rocca (WI 30% OP)
  • San Buono (WI 100% OP)
  • Villa Mazzarosa (WI 100% OP)

Dr. Bill Higgs, Chief Executive of the Company, commented:

"The divestment of these non-core assets is consistent with our stated strategy to grow the Company by investing in exploration, development and production opportunities that can add material resources and reserves to the Company's portfolio. Completion of the Transaction will also free up our team to focus on the value-adding opportunities that remain within our portfolio."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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