Tuesday September 29, 10:59 am Eastern Time
Company Press Release
biz.yahoo.com
SOURCE: Equatorial Energy Inc.
Equatorial Energy Inc. Closes U.S. $18.5 Million Acquisition of 80% Interest in Sembakung Oilfield, Ne Kalimantan, Indonesia; Announces Cdn. $2,000,000 Convertible Debenture Private Placement
CALGARY, Sept. 29 /CNW-PRN/ - Equatorial Energy Inc. (''Equatorial''; Vancouver - ''OZ'') is pleased to announce its wholly-owned subsidiary, Equatorial Energy (International) Inc. (''the Company'') has closed the U.S.$18,500,000 acquisition of Energy Process Services Ltd. (''EPS'') from First Dynasty Mines Ltd. of Singapore (''FDM''). EPS' principal asset is an 80% controlling interest in the Sembakung Oilfield, NE Kalimantan.
The Sembakung Oilfield has remaining recoverable light oil reserves of approximately 39 million barrels and is currently producing 3,200 BOPD. The Company will control the Board of Directors of the operating company, which is the ''Contractor'' under the Technical Assistance Contract (''TAC'') with Pertamina. The TAC provides for the Contractor to govern field and other operations. Remedial workover operations will commence immediately and are projected to increase existing production by 20-25% prior to year-end. Development drilling consisting of 12-18 wells will commence in the second quarter of 1999, which should advance production beyond 10,000 BOPD.
The acquisition was financed with U.S.$1,000,000 cash and the issuance of secured notes payable in the total amount of U.S.$17,500,000 as follows:
a) Notes No.1 & No.2
- Aggregate principal - U.S.$15,300,000;
- Interest rate - 10% payable quarterly; providing, however, the
interest rate will be reduced to 8% if 1/3 of the principal amount
is repaid by Dec. 31, 1998;
- Maturity - 3 years from the date of Closing;
- Security - Guaranty of the Company and pledge of shares of EPS;
b) Note No.3
- Principal - U.S.$ 2,000,000;
- Interest rate - prime + 3%, payable quarterly; providing, however,
if the principal is repaid before Dec. 31, 1998, interest will be
waived from the date of issuance until the date of payment;
- Maturity - 2 years from the date of Closing;
- Security - Guaranty of the Company and pledge of shares of EPS.
At Closing, U.S.$1,813,500 was paid against Notes No.1 & No.2 by the issuance of 9 million common shares of Equatorial at Cdn.$0.31 per share resulting in a new balance of U.S.$13,686,500.
Further, the Company has agreed to pay contingent production bonuses totaling U.S.$3 million should production thresholds of 7,500, 10,000 and 12,000 BOPD be attained.
The recipients of the 9 million shares of Equatorial have also agreed to execute a ''Voting Trust'' in favor of Equatorial's senior management and place certain restrictions on the resale of the shares for a 3-year period. The recipients will also have the right to appoint one nominee to Equatorial's Board for so long as the recipients own at least 10% of the voting shares of Equatorial.
President Marshall Abbott states: ''The Sembakung TAC will act as the cornerstone of Equatorial's future growth in Indonesia. The potential of this acquisition to increase our production will add significant value to our Company and, more importantly, provide a steady base of cash flow to finance future growth. I believe the Sembakung development project will be a Company builder and also provide real benefits in terms of job creation and increased domestic production for our partners at Pertamina and our friends in Indonesia.''
Equatorial also announces the private placement of Cdn.$2,000,000 of convertible debentures, the net proceeds from which will primarily be applied to further develop Equatorial's shallow oil and gas development project at Tanjung Lontar in South Sumatra.
The convertible debentures will bear interest at 10% and be convertible into common shares of Equatorial on the basis of 2,000 common shares for every Cdn. $1,000 face value of debentures issued. The term of the debentures is 5 years, subject to Equatorial's right to call for conversion of the debentures into common shares after two (2) years if Equatorial's common shares trade in excess of Cdn. $1.00 for 20 consecutive days.
Security for the debentures will consist of a pledge of the Company's shares in a wholly owned subsidiary and an assignment of certain accounts receivable. A commission of 2% of gross proceeds will be paid to companies controlled by two (2) directors. In addition, incentive stock options to acquire 300,000 common shares at market price will be granted to companies controlled by the directors.
The terms of the debenture private placement are subject to all necessary approvals including the appropriate regulatory authorities.
Equatorial is an independent energy company engaged in the acquisition, exploration, and development of international oil and gas properties. ''Our aim is to become a successful global ''boutique'' by operating properties in international locations where our proven expertise can generate maximum returns to shareholders''. Equatorial is also pursuing additional on-shore oil development projects in other countries in order to diversify its interests.
The Vancouver Stock Exchange has neither approved nor disapproved the information contained herein.
SOURCE: Equatorial Energy Inc.
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