MX Oil, an oil and gas exploration company, has agreed to sell its interest in the OML 113 licence offshore Nigeria, which includes the Aje Field, to an unnamed buyer.
MX Oil previously received expressions of interest to acquire all or part of its Nigerian investment or to invest into the underlying asset directly alongside the company. This was followed by a formal offer in January 2015 for the whole of its Nigerian investment. To remind, in July 2015, MX Oil agreed to invest in an indirect, non-operated, 5% revenue interest in the OML 113 licence.
Yinka Folawiyo Petroleum is the operator of the field, and its partners are New Age (32.077% contributing interest), FHN (22.5% contributing interest), EER (22.5% contributing interest) and Panoro (16.255% contributing interest). The partners in the project took a Final Investment Decision to develop the Aje in October 2014.
“The Directors believe a sale of its Nigerian investment is an attractive option for the company and they have today signed a term sheet with the proposed purchaser who is part of an established international oil and gas group,” MX Oil said on Tuesday.
Under the terms of the proposal, the company will receive $18 million for the sale of its investment upon meeting certain conditions.
Initially up to $3.5 million will be advanced to the company in two stages after the signing of binding legal documentation. These funds will be used to finance the remaining cash calls expected to be required for the investment in order to bring the underlying asset into production, MX Oil said.
The proposed purchaser will then have the right to acquire the investment, which is most likely to be when initial oil production starts, said MX Oil. On exercise of this acquisition right, the company will receive one payment of $5.75 million and then a second payment of $5.75 million six months later. The balance of $3 million will then be paid in three annual $1 million installments from the date of the exercise of the acquisition right, although these payments may be accelerated in the event that the oil price exceeds $45 per barrel for a three month period.
MX Oil says that if, for whatever reason, the purchaser decides not to exercise its acquisition right then the amount initially advanced will either be repaid, converted into a convertible loan in the company holding the investment or become a secured loan to be repaid from the cash flow generated from oil production.
While the company is moving towards the signing of legal documentation within the next few weeks, MX Oil said, the transaction is still subject to contract and the completion of due diligence and therefore there can be no guarantee that a transaction will either be completed at all or on the above terms.