15th Sep 2015 07:47
LONDON (Alliance News) - Mosman Oil and Gas Ltd shares rose on Tuesday morning after it said it has agreed to sell a royalty to part-fund its proposed acquisition of the South Taranaki energy project in New Zealand.
Mosman shares were up 20% to 7.82 pence per share on Tuesday morning.
Mosman has signed a conditional sale and purchase agreement with Origin Energy to acquire a stake in the project and on Tuesday, the company agreed to sell a 2.0% royalty from the project to Canadian-based Ridge Royalty Corp for NZD4.0 million, which will part fund the acquisition.
"We are delighted to have secured a large proportion of the funding for the STEP Acquisition, one which the board sees great value in and believes will be transformational for Mosman," said Chairman John Barr.
The total consideration for the project acquisition is NZD10.0 million, which will be paid in two tranches, the first of which will be for NZD7.0 million once the deal is completed and the remaining NZD3.0 million will be paid six months later. Mosman has already paid a 5% deposit.
The company has previously said however, that the total amount it will pay for the deal is subject to the "final percentage ownership" it will hold as it is acquiring the project through a joint venture with WRDLS Pty Ltd.
Mosman intends to own a minimum of 40% of the project and a maximum of 70%. The remaining balance will be owned by WRDLS.
The royalty sale allows the company to purchase its minimum 40% stake, but the company continues to source further funding to up it to the desired 70%.
"The sale of the STEP royalty to Ridge is an effective funding mechanism as it delivers funding for our minimum target of 40% of the STEP acquisition and does not involve any share dilution or debt. We continue to actively negotiate several other funding options to finance up to 70% of the STEP acquisition," said Barr.
Mosman still plans on sourcing the remaining funds needed to complete the acquisition through a "combination of existing cash, sale of a royalty on future production, debt, equity, and convertible securities", it said.
As part of the royalty deal, Mosman has also granted Ridge a right of first refusal for a two-year term to acquire similar royalties on Mosman's ten other current oil and gas projects in its Australia and New Zealand portfolio.
By Joshua Warner; [email protected]; @JoshAlliance
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