TomCo Energy announced Monday that it has Monday signed a Letter of Intent (LOI) with Avenue Group, a NY based U.S. listed Oil & Gas Company, and its wholly-owned subsidiary Avenue Energy Israel, to acquire a 50%. interest in the Heletz-Kokhav License awarded to AEI by the Israel Petroleum Commission.
TomCo and AEI will now work to finalise the terms of a binding contract.
Under the terms of the LOI, TomCo undertakes to:
1. within 5 days of signing the LOI, pay a non-refundable security deposit of
US$75,000, granting TomCo 45 days exclusivity
in which to sign a definitive agreement ("Closing").
This period can be increased to 60 days by TomCo paying an
additional deposit of US$25,000;
2. at Closing, pay AEI US$1 million in cash;
3. at Closing, issue to AEI TomCo ordinary shares ("Shares") valued at US$0.5 million at a price per Share equivalent
to the average middle market price for the seven days prior to Closing;
4. at Closing pay to AEI 50%. of AIE costs incurred to date in relation to the License, which have been confirmed at US$108,000;
5. over the three year Phase 1 period of the License pay up to US$4.5 million of development costs;
6. pay a further US$1.5 million to AEI after a 30 years production lease is issued, which lease may be issued once production
at the field reaches 300
bpd; and
7. pay a further US$5 million to AEI after the recoverable reserves are declared to be more than 10 million barrels by an
internationally acceptable geologist.
The Heletz-Kokhav field, located 55km south of Tel Aviv and 12km east of the Mediterranean, is Israel's only producing onshore oil and gas field. The 60,000 acre license has produced in excess of 17 million barrels of oil to date from Cretaceous sands, with peak production of 3,000 to 4,200 barrels per day ("bpd") between 1959 and 1967.
The original oil-in-place (OOIP) for the field was estimated at 50.7 million bbls; the Israeli Government estimates that there are 2 million bbls of primary recoverable oil remaining, and studies suggest 5 -10 million bbls of secondary recovery potential. A number of undrilled, deeper exploration prospects have estimated potential of over 30 million bbls.
Recent production for the field was around 60 bpd, although TomCo expects that the implementation of modern production and recovery methods and the drilling of additional wells on the License will significantly increase production, resulting in the granting of a 30 years Production Lease.
(END) Dow Jones Newswires