Simba Energy Inc., an independent Canadian-based oil and gas exploration company, reported Wednesday that it has signed an exclusive letter of intent (the LOI) with a private group based in Calgary, Alberta to farmout up to 40 percent of Simba’s interest in the Production Sharing Contract (PSC) for Block 2A, onshore Kenya, for a total commitment of $8.6 million.
The principal commercial terms of the farmout are highlighted as follows:
- $2.0 million for cost recovery will be placed in trust immediately upon signing of the definitive agreement. These funds will be released to Simba once the farmout agreement is approved by the Kenya Government. This payment for cost recovery will entitle the Group to a 10 percent interest in the PSC
- Simba will be carried through the funding and completion of $6.6 million in exploration work to include a minimum of 261 line miles (421 line kilometres) of 2D seismic that is to be carried out in 2014
- In total, the Group will earn a 40 percent interest in Simba’s Kenya PSC upon payment of the $2.0 million and completion of the $6.6 million work program
- Upon completion and interpretation of seismic results both parties mutually agree to either drill a first exploration well with each party responsible for its own share of costs, or; to farm out to other third parties on mutually acceptable terms
Robert Dinning, CEO of Simba, stated, “This LOI provides a fully funded and accelerated exploration program through to selecting drill targets and allows Simba to recover $2.0 million in costs upon completion of the definitive agreement and host Government approval. The Company and its shareholders retain significant interest in Block 2A. This block is highly prospective given the exploration work completed to date by the Company and exploration activities underway by neighbouring energy companies, including Tullow, Africa Oil, Marathon, Afren and Taipan on the adjacent blocks to 2A in the Anza basin. The Anza basin is one of the largest Tertiary-age rift basins in East Africa. We expect the definitive agreement to be signed in 1Q 2014 – and for the 2014 work program to begin thereafter.”
Completion of the farmout is subject to normal host Government approvals and receipt of acceptance for filing by the TSX Venture Exchange.
The Company and the Group have exchanged drafts of a second letter of intent in reference to the Company’s concessions in Guinea. This second letter of intent defines the intention of the parties to enter into a second farmout agreement that will define the Group’s participation in Simba’s concessions in Guinea. This second letter is expected to be signed before month end January 2014.
