Rights Issue Successful
Red Sea Oil: RSO Rights Issue Results in Gross Proceeds of C$43.6 Million; Exploration Drilling to Resume in Third Quarter
VANCOUVER, BRITISH COLUMBIA--Red Sea Oil Corporation ("RSO") is
pleased to announce the successful completion of the RSO rights
offering on June 4, 1999. The rights offering was oversubscribed
and pursuant to the rights offering, 34,894,870 units on offer
were placed at a price of C$1.25 per unit resulting in gross
proceeds to RSO in excess of C$ 43.6 million. Each unit is
comprised of one common share and one common share purchase
warrant. Every two warrants entitles the holder to purchase an
additional common share at a price of C$ 1.50 at any time prior to
17:00 hours (Alberta time) on January 31, 2000. Yorkton
Securities Inc. acted as Dealer Manager in connection with the
offering.
The net proceeds of the rights offering will be used to fund the
ongoing exploration program in Area NC177 onshore Libya, including
the drilling of the C1-NC177 well which will spud in mid-August,
1999 as well as fund the equity requirement of the development
costs of the En Naga North and West fields and to repay
outstanding indebtedness to Lundin Oil. The C1-NC177 well will
test the Haruj "A" prospect immediately south of En Naga, one of
several drillable structures identified from the 1998 seismic
campaign (see attached map).
RSO has commissioned a report prepared by Sproule International
Limited ("Sproule") of Calgary estimating the proven and probable
oil reserves for the En Naga North and West oil fields together
with the net present values of such reserves. On an unrisked
basis, the report concludes that the En Naga North and West oil
fields contain 71 million barrels of oil (on a risked basis,
probable reserves are reduced by 50 percent to account for risk
for a total of 44 million barrels) having a net present worth
value to RSO, discounted at 10 percent, of approximately US$45
million (based upon escalated cost and price assumptions). In
addition, Sproule conducted an evaluation of RSO's unproven
properties and determined that the fair market value of such
properties is an additional US$47.8 million.
RSO has submitted a field development plan for the En Naga North
and West oil fields for the approval of the Management Committee
(which committee is controlled by the Libyan National Oil
Company). It is estimated that first production will commence
within 12 months of the approval of the development plan having
been obtained. The forecast peak production rate from the En Naga
North and West fields is estimated at 22,000 bpd (24 months after
start-up). RSO is currently in discussions with various financial
institutions regarding a project financing for the development.
In April 1999, the Libyan UN sanctions were suspended resulting in
an improved climate for investment and operations in the Libyan
oil industry.
RSO is the operator and holds a 60 percent interest in Area NC177.
Lundin Oil holds the remaining 40 percent interest and is also
the single largest shareholder of RSO with 58 percent of the
shares. Lundin Oil subscribed for the 20,334,100 units to which
it was entitled pursuant to the rights offering for an aggregate
subscription price of C$25,417,625.
ON BEHALF OF THE BOARD
Ian H. Lundin, President
NOTE: Location map available by contacting the Company at the
phone number listed in the contact information.
FOR FURTHER INFORMATION PLEASE CONTACT:
Red Sea Oil Corporation
Sophia Shane
Corporate Development
(604) 689-7842
The Alberta Stock Exchange has neither approved nor disapproved
the information contained herein. |
