12th May 2008 06:00
RNS Number : 1361U
Island Oil and Gas PLC
11 May 2008
Island Oil & Gas PLC Asset Sale Highlights ·; Island to sell Netherlands assets to Delta Hydrocarbons BV for a total consideration of $25m and future overriding royalty interests on gross production from the Amstel Field and other potential satellite developments through the Amstel facilities ·; Positive cash flow to be provided by royalties on production ·; Delta to advance an additional $10m to Island to be repaid from royalty income ·; Proceeds to be used to develop asset portfolio and reduce debt ·; £ 12m RMB loan facility to be repaid in full ·; New £5m flexible loan facility agreed with RMB Island Oil & Gas PLC ('Island') today announces that its wholly owned
subsidiary, Island Oil & Gas BV ("IOGBV"), has signed a Term Sheet (the 'Transaction') with Delta Hydrocarbons B.V. ("Delta") for the sale of the entire issued share capital of Island Netherlands BV ("INBV") to Delta, subject to execution of the fully termed sale and purchase agreement. The assets (the 'Assets') being disposed of include INBV's 83.33% interest in
the Q13a Production Licence, which contains the undeveloped Amstel Oil Field,
and its 100% interest in the recently awarded Q13b Exploration Licence, covering
the shallow part of the Licence and including the undeveloped Zaan oil field and
several appraisal and exploration prospects. The consideration for the Transaction will be US$ 25,000,000 payable immediately
on completion. In addition, Delta will advance to Island US$ 10,000,000 (the "Advance"). It is intended that the Advance will be repaid from an Overriding Royalty Interest ("ORI") granted to IOGBV of 2.5% of the gross export production from the Amstel Oil Field; and 2% and 1.5% respectively of the gross export production from the Zaan oil field and any tie-backs via the future Amstel facilities or any other operated tie-backs resulting from any of the licence areas that are the subject of the Transaction. In the event that the ORI does not cover the full amount of the Advance any remaining would be repayable in cash or at Delta's discretion can be converted into Island shares at the average weighted 20 day trading price prior to conversion. Proceeds from the sale of the Assets will be used by Island to provide an
injection of fresh working capital to further advance the evaluation of its
diverse portfolio of domestic and international assets and to reduce its current
level of corporate debt. The funds will be used to bring forward the opportunity
to create value for shareholders through licence farm out, asset sale and/or
active exploration. Island retains the belief that there is considerable potential for adding value
through acquiring new licences in the Netherlands and is therefore actively
considering new ground floor opportunities. The Transaction enables Island to repay the existing STG 12,000,000 RMB loan
facility in full. RMB have also agreed to provide Island with a new loan
facility of STG 5,000,000 for an initial period of 12 months. The combined RMB
loan facility and Delta Advance will further strengthen Island's short to medium
term working capital position. Paul Griffiths, Chief Executive commented: "Island is delighted to have secured this deal with Delta Hydrocarbons. We have
achieved a significant uplift in value through the process of acquisition,
development and subsequent sale. The assets were acquired on ground floor terms
and Island invested over two years in maturing the assets to a point where a
significant return for shareholders has now been realised. Additionally we
retain the potential for future cash flow from production through our royalty
arrangements with Delta and Encore. We are confident that Delta Hydrocarbons
bring the necessary technical expertise and financial strength to accelerate the
development of this important asset in order to provide cash flow at the
earliest opportunity. Island will now focus on maturing our wider portfolio of projects to a stage
where we can create both short and long term value for our shareholders." 12 May 2008 Further information: Island Oil & Gas plc
Paul Griffiths
Karl Prenderville Tel: +353 1 6313755
www.islandoilandgas.com Davy (NOMAD and broker)
Anthony Farrell Tel: +353 1 679 6363 Landsbanki (UK broker)
Simon Robinson Tel: +44 (0)207 426 9000 College Hill (Financial PR)
Paddy Blewer Tel: +44 (0)20 7457 2020
Nick Elwes
This information is provided by RNS
The company news service from the London Stock Exchange
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Related Shares:
IOG.L
