RNS Number:2415G
Equator Exploration Limited
24 October 2007
FOR IMMEDIATE RELEASE 24 October 2007
EQUATOR EXPLORATION LIMITED
Unaudited interim report for the six months
ended 30 June 2007
Chief Executive's Statement
The first half of 2007 has been extremely challenging for Equator. The Company's
operations on the Bilabri Field development continued to suffer from ongoing
security issues, including further kidnappings of rig personnel which resulted
in protracted inactivity and culminated in the termination of both the drilling
rig contract and the FPSO contract. This has put completion of the development
by Equator in significant doubt. In September, Equator agreed to transfer the
responsibility of completing the project to our partner and operator of the
block, Peak Petroleum Industries Limited ("Peak"), while retaining a smaller
interest in future oil and gas production.
In the light of the uncertainties surrounding the recoverability of the costs we
have incurred to date on OML 122, on both Bilabri and Owanare, we consider that,
as a matter of financial prudence, a further provision should be made. We have
therefore made provision for US$70million in the first half of 2007 in addition
to the US$200million provision made in 2006.
However, against the disappointments on the Bilabri development, we have been
successful in farming out a portion of our interest in the deep water block OPL
323 to BG Exploration and Production Nigeria Limited ("BG") which, subject to
Nigerian government approval, will bring in a total of up to US$75million in
cash and carry on exploration and appraisal costs.
As a consequence of concluding a settlement with Peak, whereby Peak will take
over the operation and financing of OML 122, the board has implemented a
strategy to optimise the value of its exploration assets through a process of
farm outs, sales and carried interests. This will allow a realignment of the
organisation with the reduction in operational activity. It is expected that
the revised organisation will be fully implemented by early 2008. We firmly
believe that this restructuring is in the best interests of all stakeholders as
it will reduce the funding requirements in the medium term while we maximise the
value of the Company's assets.
Development of OML 122 with Peak
The development drilling in the Bilabri Field, undertaken with the lease holder
Peak, continued during 2007 with re-entry of the D2 and D4 wells in order to
complete them as producing wells. Equator continued to fund 100% of the project
due to the payment default by Peak.
During the first half of 2007, the project suffered from serious setbacks,
including continuing security threats from militants and a kidnapping that
resulted in extended periods when the drilling rig was not being economically
employed. The contract for the Bulford Dolphin drilling rig was terminated for
prolonged force majeure on 11 May 2007. Subsequently, BW Offshore terminated
the contract for the FPSO.
In September 2007, Equator agreed terms with Peak, to enable Peak to take over
the remaining development of the Bilabri oil project with finance made available
by a third party. Under the terms of the agreement, Equator is to receive an
upfront payment and Peak will assume the current and future project liabilities.
Equator will receive a 5% carried interest in the oil project and a paying
interest of 12.5% in any gas development. However, the directors consider that
it is prudent to retain the total provision of US$270million until further
clarification is obtained on Peak's progress with the Bilabri development.
Deep Water Nigeria OPL 321 and OPL 323
The Company has a 30% equity interest (net economic interest 26%) in the
Production Sharing Contracts ("PSCs") for the Nigerian deep water blocks, OPL
321 and OPL 323, awarded in March 2006 following the 2005 licensing round. The
Korean National Oil Corporation ("KNOC") is the operator of both blocks with a
60% equity interest in each, while local companies have the remaining 10% equity
interest. The two blocks have several very large mapped prospects with risked
recoverable prospective reserves estimated at 877 million barrels of oil and in
excess of 3 billion cubic feet of gas by independent reserves consultants
Netherland, Sewell and Associates ("NSAI") for Equator's 30 per cent interest in
the two blocks.
The co-venturers continue with the processing and interpretation of the 3D
seismic survey in order to select the drilling locations for the two obligation
wells in each block. Negotiations are in progress for a deep water drilling rig
to commence drilling in 2009.
In August 2007, the Company entered a farm-out agreement with BG, whereby BG
will be assigned two thirds of Equator's 30% interest in OPL 323, subject to the
approval of the Nigerian National Petroleum Corporation ("NNPC"). The Company
will receive a cash sum together with a carry on its remaining 10% interest on
both exploration and appraisal. The total amount of the proceeds could be up to
US$75million. BG will also take over the requirement to provide the bank
guarantee for the work programme on this block.
In addition, Equator has agreed with its partners in the bidding group to buy
back, on completion of the farm-out, 3% of the Net Profits Interest granted in
March 2006.
Joint Development Zone Block 2
The Company has a 9% equity interest (net economic interest 8.75%) in the PSC
for Block 2 in the Joint Development Zone between Nigeria and Sao Tome e
Principe, awarded in March 2006 following the 2004 licensing round.
Block 2, which is operated by Sinopec of China, is adjacent to Block OML 130,
which hosts the Akpo field containing 600 million barrels of oil and 1 trillion
cubic feet of gas, which is operated by Total. Recent drilling activity in the
region has increased our confidence that Block 2 has the potential to contain
significant reserves.
The Company has provided a cash-backed guarantee for its share of one obligation
well in the first of two exploration phases of 5 years specified in the PSC.
During 2007, the co-venturers have re-processed existing 3D seismic with the
very latest techniques, and continue with the selection of the drilling location
for the one commitment well. A drillship, the Aban Abraham, has been contracted
to drill the well, commencing in 2009, with an option to drill a follow up
appraisal or a second exploration well.
Risked recoverable prospective resources for Equator's 9 per cent share are
estimated by NSAI at 121 million barrels of oil and 168 billion cubic feet of
gas.
Exclusive Economic Zone of Sao Tome e Principe
During 2007, the government of Sao Tome e Principe has continued to work with
its legal and technical advisers on the delineation of blocks for its Exclusive
Economic Zone ("EEZ") and on new petroleum legislation and a model PSC. In
preparation for the delineation of the blocks anticipated early in 2008, the
Company has interpreted the 2D seismic surveys that it had partially funded.
Upon completion of the block delineation, and pursuant to its agreements with
the government, Equator will seek to exercise its right to select two blocks and
negotiate PSCs for a 100% interest with the government.
Management and directors
During the first half of 2007, there were several changes to the board of
directors. In February 2007, Alex Dembitz resigned as a non-executive director.
In March 2007, following the resignation of Jeffrey Auld as an executive
director, Philip Rand was appointed Chief Financial Officer and executive
director. Also in March, Martin Adams and Tony Renton were appointed as
non-executive directors.
During the second half of 2007, there were further board changes. In July, Sam
Jonah resigned as executive chairman for personal reasons. In September 2007,
Baroness Chalker resigned as a non-executive director due to other business
commitments.
Share structure
As at 30 June 2007, there were 175,165,590 common shares in issue. No further
shares have been issued since the balance sheet date.
As at 30 June 2007, there were 12,852,750 outstanding share options, 16,677,307
outstanding and issued warrants and 12,307,693 contracted but not issued
warrants. Since 30 June 2007 a further 25,641,000 warrants have been issued.
The warrants and options are exchangeable into common shares at prices ranging
from #0.30 per share to #3.05 per share.
Results and dividend
The group made a loss of US$84.8million in the period, an increase of
US$81.2million over the loss in the first half 2006 of US$3.6million (as
restated). This is mainly represented by a provision of US$70million against the
value of exploration and evaluation assets and a charge of US$8.1million as a
revaluation of the warrants issued in 2006 to the lenders under the US$65million
loan facility. The operating activities of the group during the first half of
2007 continued at the same rate as in 2006 whilst activity continued on the
Bilabri development. Net interest payable during the half year was
US$2.9million and other overheads were US$3.8million.
As a consequence of providing fully for the possible non-recoverability of the
Company's investment in OML 122, net assets at 30 June 2007 were US$124.1million
or US$0.71 per issued share at 30 June 2007.
Financing
During 2007, the Company entered into a number of working capital financing
arrangements. A total of US$22.5million has been provided by a number of
lenders of which US$17.5million is secured and US$5million is unsecured. In
conjunction with the loans, the Company issued to the lenders warrants to
subscribe for shares over a period of two years, at strike prices between #0.30
and #0.35 per share.
On 8 February 2007, Equator agreed terms with a Nigerian bank for the provision
of the performance bonds required under the PSCs for OPL 321 and OPL 323 to
guarantee its share of US$83million for the minimum work programmes. Equator
negotiated for the bank to provide the guarantees without cash collateral.
Instead, the bank has taken security over Equator's shares in the two
subsidiaries owning the interests in the PSCs, Equator Exploration 321 Nigeria
Limited and Equator Exploration 323 Nigeria Limited.
Future prospects
The Company has a potentially valuable exploration portfolio in the prospective
waters of the Gulf of Guinea, offshore West Africa. Drilling on three deepwater
blocks is expected to commence in 2009. A rig has been secured for JDZ Block 2
and discussions are advanced for one for OPL 321 and OPL 323. There has been
exploration drilling during 2006 and 2007 in the areas surrounding these blocks
with encouraging results. The discovery of hydrocarbons in these wells confirms
the presence of the sources from which oil and gas can migrate to the geological
structures identified from 3D seismic in the Company's blocks.
Litigation
In October 2007, a petition, to wind up one of the Company's subsidiaries, which
owns no material assets, was issued by a joint creditor of that subsidiary and
its Nigerian partner. The Company has received legal advice and the directors
do not believe that additional provision needs to be made.
There was no other outstanding litigation at the date of this report.
Going concern
On 11 June 2007 the Company announced that it had entered into a merger
agreement with Camac Energy Holdings Limited ("Camac"). On 31 August 2007,
Equator and Camac agreed to terminate the merger negotiations. Subsequent to
this termination, the directors have examined the financial status of the
Company and are of the opinion that there are sufficient alternative sources of
funding available to the group. These sources include the farm-out of 20 per
cent of OPL 323, announced in August 2007, and the new short term working
capital facilities announced in September 2007. Therefore, the board considers
it appropriate to prepare the financial statements on a going concern basis.
Suspension of shares
The suspension of trading on the Alternative Investment Market of the London
Stock Exchange ("AIM") is expected to be lifted once the 2006 Annual Report and
Financial Statements and these interim results have been published.
Wade Cherwayko
Director & Chief Executive
23 October 2007
Enquiries:
Equator
Philip Rand
Chief Financial Officer 020 7235 2555
Beaumont Cornish Limited (Nominated Adviser to Equator)
Roland Cornish 020 7628 3396
Fox-Davies Capital Limited (Broker to Equator) 020 7936 5234
Richard Hall
Buchanan Communications
Bobby Morse/Ben Willey 020 7466 5000
Unaudited consolidated income statement for the six months ended 30 June 2007
Six months Six months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
Continuing operations Note $'000 $'000 $'000
(Restated)
Revenue 57 - 277
Cost of sales (471) - (807)
Gross profit (414) - (530)
Administrative expenses (11,457) (6,175) (36,272)
Exceptional item:
impairment charge 2 (70,000) - (200,000)
Loss from operations (81,871) (6,175) (236,802)
Finance income 1,093 2,618 6,282
Finance costs (3,968) - (5,132)
Finance income - net (2,875) 2,618 1,150
Loss before income tax (84,746) (3,557) (235,652)
Income tax expense - - -
Loss for the period (84,746) (3,557) (235,652)
Loss per share 3
Basic ($0.48) ($0.02) $(1.35)
Diluted ($0.48) ($0.02) $(1.35)
Unaudited consolidated balance sheet as at 30 June 2007
Six months Six months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
(Restated)
Notes $'000 $'000 $'000
Assets
Non-current assets
Intangibles: Goodwill 175 1,373 175
Exploration and
evaluation assets 4 200,275 316,204 190,283
Multi-client
library 5 1,320 2,194 1,791
201,770 319,771 192,249
Tangibles: Property,
plant and equipment 6 784 986 908
202,554 320,757 193,157
Current assets
Inventories 7 1,488 3,941 1,508
Trade and other receivables 8 9,103 3,222 4,818
Cash and cash equivalents 24,839 108,302 86,708
35,430 115,465 93,034
Total assets 237,984 436,222 286,191
Equity
Capital and reserves
attributable to equity
holders of the company
Share capital 9 - - -
Capital reserves 454,463 448,193 458,643
Accumulated losses (330,262) (12,354) (245,516)
124,201 435,839 213,127
Liabilities
Non-current liabilities 10
Borrowings 68,996 - 54,818
Long term payables 5,671 - 3,064
Deferred income 22,312 - 10,902
Current liabilities
Trade and other liabilities 11 16,804 383 4,280
Total equity and liabilities 237,984 436,222 286,191
Approved by the board of directors on 17 October 2007
Signed on behalf of the board of directors:
Martin Adams
Director
Philip Rand
Director - Chief Financial Officer
Unaudited consolidated statement of changes in equity for the six months ended
30 June 2007
Note Share Capital Retained
capital reserves earnings Total
$'000 $'000 $'000 $'000
Balance at 1 January 2006 - restated - 204,409 (9,864) 194,545
Changes in equity for 2006
Total loss for the year - - (235,652) (235,652)
Shares issued - 253,484 - 253,484
Cost of shares issued - (11,010) - (11,010)
Share based transactions - 3,960 - 3,960
Capital contribution - 7,800 - 7,800
- 254,234 (235,652) 18,582
Balance at 31 December 2006 - 458,643 (245,516) 213,127
Total loss for the period - - (84,746) (84,746)
Shares issued - - - -
Cost of shares issued - - - -
Share based transactions - 1,610 - 1,610
Capital contribution - (5,790) - (5,790)
Balance at 30 June 2007 - 454,463 (330,262) 124,201
Included in capital reserves as at 30 June 2007 are amounts attributable to
share based transactions of US$9,419,316 (31 December 2006 US$8,674,449, 30 June
2006 US$ $7,161,841 - restated). There were no liabilities for which a
counterparty's right to cash or otherwise had vested by 30 June 2007
Unaudited consolidated cash flow statement for the six months ended 30 June 2007
Six months Six months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
$'000 $'000 $'000
Cash flows from operating activities
Loss from operations (81,871) (6,175) (236,802)
Adjustments for:
Impairment provision 70,000 - 200,000
Pre-licence costs written off - - 23,885
Amortisation of multi-client library 471 404 807
Share based transactions 1,610 2,378 3,960
Warrant adjustment 4,109 - (4,000)
Goodwill written down - - 1,198
Depreciation on fixtures and equipment 211 161 372
Depreciation adjustment on sale of motor vehicle (40) - -
Operating cash flows before movement in working
capital (5,510) (3,232) (10,580)
(Increase)/decrease in inventory 20 - (1,508)
(Increase)/decrease in trade and
other receivables 1,688 (3,218) (873)
Increase/(decrease) in trade payables 1,433 (33) 519
Increase/(decrease) in other payables (8,651) - 2,895
Net cash used in operating activities (11,020) (6,483) (9,547)
Cash flows from investing activities
Interest received 1,093 2,618 6,282
Interest paid (3,314) - -
Acquisition of multi-client library - - -
Acquisition of exploration and
evaluation assets (58,581) (265,870) (352,932)
Acquisition of fixtures and equipment (47) (408) (541)
Net cash used in investment activities (60,849) (263,660) (347,191)
Cash flows from financing activities
Loan proceeds 10,000 - 65,000
Share capital issued (net of costs) - 242,474 242,474
Net cash from financing activities 10,000 242,474 307,474
Net decrease in cash and cash equivalents (61,869) (27,669) (49,264)
Cash and cash equivalents at
beginning of period 86,708 135,972 135,972
Cash and cash equivalents at end of period 24,839 108,303 86,708
Notes to the interim report for the six months ended 30 June 2007
1. Basis of preparation
The interim accounts have been prepared in accordance with applicable
International Financial Reporting Standards and the Company's established
accounting policies as described in the financial statements for the year ended
31 December 2006. The interim accounts do not constitute statutory accounts
within the meaning of s240 of the Companies Act 1985.
2. Loss from operations
Six months Six months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
$'000 $'000 $'000
Loss from operations has been arrived at
After charging/(crediting):
Net foreign exchange loss/(gain) (8) - (2)
Impairment provision 70,000 - 200,000
Share based transactions 1,610 2,513 3,960
Revaluation of warrants 8,109 - (4,000)
Amortisation of multi client library 71 403 807
Depreciation of fixtures and equipment 171 122 372
Loss on sale of motor vehicle 40 - -
Directors' remuneration 916 698 2,097
Staff costs 1,006 509 1,859
The impairment provision of US$70million (2006, US$200million) reflects the
total investment in OML 122 since inception and is the potential loss in value
if there were to be no recoveries.
3. Loss per share
The calculations of the basic and diluted loss per share are
based on the following data:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
$'000 $'000 $'000
Loss for the period
Loss for the purpose of basic loss per share (net loss
for the year) (84,746) (2,330) (235,652)
Effect of dilutive options and warrants - - -
Loss for the purposes of diluted loss per share (84,746) (2,330) (235,652)
Number of shares
Weighted average number of common shares in
issue during the period 175,165,590 167,870,663 171,432,878
Effect of dilutive options and warrants - - -
Weighted average number of common shares in issue
during the period for the purpose of diluted
loss per share 175,165,590 167,870,663 171,432,878
The options and warrants in existence at the end of each period end did not have
a dilutive effect as the exercise price exceeded the average market price of the
common shares on the loss per share.
Notes to the interim report for the six months ended 30 June 2007
4 Exploration and evaluation assets
West West
Africa Africa
$'000 $'000
Cost
At 1 January 2007 190,283
Additions:
Capitalised costs on OPL 321 1,257
Capitalised costs on OPL 323 1,057
Capitalised costs on JDZ Block 2 273
Investment in OML 122 exploration and development 77,378
Other capitalised investments 27
Impairment provision (70,000)
9,992
At 30 June 2007 200,275
5 Investment in multi-client library
$'000
Cost
At 1 January 2007 4,035
Additions -
At 30 June 2007 4,035
Accumulated amortisation
At 1 January 2007 2,244
Charge for year 471
At 30 June 2007 2,715
Carrying amount
At 1 January 2007 1,791
At 30 June 2007 1,320
The amortization of the multi-client library is reflected within cost of sales.
Notes to the interim report for the six months ended 30 June 2007
6. Fixtures and equipment
Group Fixtures Motor
and fittings Equipment vehicles Total
$'000 $'000 $'000 $'000
Cost
At 1 January 2007 393 595 429 1,417
Additions - 68 42 110
Disposals - - (63) (63)
At 30 June 2007 393 663 408 1,464
Accumulated depreciation
At 1 January 2007 129 203 177 509
Charge for period 59 95 17 171
Depreciation on disposals - - - -
At 30 June 2007 188 298 194 680
Carrying amount
At 1 January 2007 264 392 252 908
At 30 June 2007 205 365 214 784
7. Inventories
Inventories represent stocks of drilling consumables such as well heads, drill
strings and pipes and are valued at the lower of cost and net realisable value.
8. Trade and other receivables
30 June 30 June 31 December
2007 2006 2006
$'000 $'000 $'000
Trade receivables 546 - 971
Other receivables 957 - 1,881
Prepayments, operator advances and accrued income 7,600 - 1,966
9,103 3,222 4,818
9. Share Capital
30 June 30 June 31 December
2007 2006 2006
No. No. No.
Issued and fully paid
Common shares with no par value 175,165,590 175,165,590 175,165,590
Notes to the interim report for the six months ended 30 June 2007
10. Borrowings and long term payables
30 June 30 June 31 December
2007 2006 2006
$'000 $'000 $'000
Loans (note i) 75,000 - 65,000
Amounts provided as advance interest (6,004) - (10,182)
Net borrowings 68,996 - 54,818
Other payables 5,671 - 3,064
Deferred income (note ii) 22,312 - 10,902
96,979 - 68,784
Note i.
On 8 August 2006 the Company entered into a loan agreement with certain of its
shareholders for US$65million. The loan has a repayment date of 7 August 2008
and carries interest at rates between 10 per cent per annum and 14 percent per
annum, payable semi-annually in arrears. In addition, the lenders have warrants
or conversion rights on up to 17,397,356 ordinary shares at #2.00 per share
expiring on 8 October 2009 of which 6,691,290 warrants, relating to US$25million
of the total borrowings, had been issued at the end of 2006. In accordance with
IFRS, the warrants that have been issued have been marked to market and treated
as an adjustment to current year losses. The reduction in the principal amount
of the loan has been treated as additional interest and will be amortised over
the life of the loan.
In June 2007, the Company entered into two working capital loan agreements, one
with a shareholder and a second with South African Oil Company, a wholly-owned
subsidiary of Camac International Limited. Both loans are for US$5million and
carry interest at 8 per cent per annum. The final repayment date is 15 February
2009 for both loans and interest is payable with the repayment. Both lenders
have been granted warrants over 7,326,000 common shares at #0.35 per share,
exercisable immediately for a period of 2 years. In addition, the lenders have
been given joint security over certain assets of the Company.
Note ii
Deferred Income refers to interest accrued on funding provided under the terms
of the OML122 Finance and Services Agreement and which may be recoverable from
future revenues. This will be accounted for as income in due course as revenue
commences and this sum represents fair value in the balance sheet.
Loans and deferred income are denominated wholly in US Dollars. Payables are
denominated wholly in Pounds Sterling
11. Trade and other payables
30 June 30 June 31 December
2007 2006 2006
$'000 $'000 $'000
Trade payables 2,211 - 533
Accruals 14,593 - 3,747
16,804 383 4,280
Notes to the interim report for the six months ended 30 June 2007
12. Contingent liabilities
Seisco Investments Limited
Seisco Investments Limited ('Seisco') is a related company that had a common
director and shareholder. During 2002 Seisco provided Equator with US$500,000 to
fund Equator's share of the acquisition costs of certain seismic data. The
amount borrowed was repaid during 2002 and 2003 from the revenue generated from
licensing the seismic data.
In the event that no future seismic revenues can be expected from the majority
owner (the 'Majority Owner') of this designated batch of seismic data acquired
in 2002, the acquisition cost of which was funded by Seisco, as a result of the
Majority Owner of such data entering into liquidation proceedings, Equator will
issue Seisco with a maximum of 100,000 common shares. The number of common
shares to be issued to Seisco in the event of the cessation of seismic revenues
due to the liquidation of the Majority Owner will be dependent upon the extent
to which the funds provided by Seisco have been repaid prior to the cessation of
seismic revenues as shown below:
Amount of initial investment repaid
Number of shares
to be issued
Greater than initial funds provided but less
than 1.5 times initial funds provided 100,000
Greater than 1.5 times initial funds
provided 50,000
The Company believes that there is a high probability that the lower number of
shares will be issued as a sum greater than the initial investment had already
been paid to Seisco at the end of 2006.
Contract for Floating Production Vessel ('FPSO')
On 16 October 2006 the Company and its partner in Block OML 122, Peak Petroleum
Industries Nigeria Limited ('Peak'), entered into an agreement with BW Endeavour
Limited ('BW'), for the provision of an FPSO for the oil production from the
Bilabri Field. Under the terms of this contract, Equator and Peak are jointly
and severally liable for certain payments in the event of early termination. The
value of the potential payment increases during the period to commencement of
oil production and then reduces to zero over the following three years.
At the end of 2006 the early termination contingent liability was US$35million
of which US$20million was to be provided by means of a bank guarantee. A bank
guarantee for US$10million had already been issued and a further US$10million
guarantee was issued on 12 January 2007. The bank guarantees were issued solely
by Equator and were secured by means of cash deposit to the issuing bank. The
early termination penalty increased to US$52million during 2007 of which
US$20million remains covered by bank guarantees in accordance with the terms of
the contract.
On 20 August 2007 the Company announced that the FPSO contract had been
terminated and that BW might activate the security. The US$20million guarantee
was activated in September 2007.
Drilling Rig Contract
On 6 February 2006, Equator entered into a contract for the continued use of the
drilling rig being used on the OML122 drilling programme. This contract followed
on from the contract entered into jointly by Equator and Peak and would allow
for further drilling once the initial 5 exploration, appraisal and development
wells had been finished and, where appropriate, were completed for production.
The 6 February 2006 contract became effective on 31 January 2007. Invoices for
drilling and ancillary services for approximately US$18million remain
outstanding. Many of these invoices are being disputed by Equator due to the
poor performance of the rig and the significant additional costs which have
resulted.
The rig operator has also submitted an invoice for US$38million for early
termination of the contract. This is disputed by the Company because the
contract was already terminated for prolonged force majeure in accordance with
its terms.
Restricted Cash Balances
At 31 December 2006, Equator had US$86.7million of cash resources. However some
of this cash was not freely available as it is utilized as deposits to secure
the issue of bonds and guarantees by its bankers under a group facility to
support potential liabilities. The deposits are interest-bearing at market
rates. As at 31 December 2006 the following amounts were restricted in use:
US$000
Collateral for JDZ Block 2 performance bond 2,800
Collateral for guarantee for FPSO early termination penalty 20,000
Notes to the interim report for the six months ended 30 June 2007
13. Subsequent events
On 11 June 2007, Equator announced that it had entered into a conditional Merger
Agreement with Camac Energy EP Limited whereby Equator would acquire, by reverse
takeover of Camac Energy Holdings Limited, its exploration and production
interests in the territorial waters of Nigeria, including participating
interests in OML 108, OML 120, OML 121, OPL 278 and OPL 282. On 31 August 2007,
Equator and Camac Energy EP Limited agreed to terminate the Merger Agreement.
In July 2007, the Company entered into a further working capital loan agreement
for US$7.5million with a shareholder lender. The loan bears interest at 8 per
cent per annum. The final repayment date is 15 February 2009 and interest is
payable with the repayment. The lender has been issued warrants over 10,989,000
common shares at #0.35 per share, exercisable immediately over a period of 2
years. The lender has been given joint security over certain assets of the
Company.
In August 2007, the Company entered into a farm-out agreement with BG
Exploration and Production Nigeria Limited for 20 per cent of its 30 percent
interest in OPL 323. The total consideration for the farm-out is approximately
US$75million made up of cash consideration payable on completion and carry on
exploration and appraisal costs. The agreement is subject to the approval of the
Nigerian National Petroleum Corporation.
In September 2007, the Company entered into an unsecured short term working
capital loan agreement for US$5million with a shareholder. The loan bears
interest at 6 per cent per annum. The final repayment date is 15 December 2007
and interest is payable with the repayment. The lender has been issued warrants
over 10,989,000 common shares at the lower of #0.30 per share or the average of
the closing share price for the first 15 days of trading following the
re-listing of Equator shares on AIM, exercisable immediately for a period of 2
years. If the loan is not repaid by the due date, the principal amount of the
loan and accrued interest will be converted into common shares at #0.10 per
share.
In September 2007, the Company entered into a settlement agreement with Peak.
Under the terms of this agreement, Equator will transfer the responsibility for
completion of the Bilabri project to Peak and relinquish its existing rights in
OML 122. In return, Peak will pay a cash sum to Equator and provide Equator
with a net profits interest of 5 per cent, carried, in the oil project and 12.5
per cent, paying, in any gas development. Peak has agreed to provide financing
for the project from an external source and will take over all current project
commitments and liabilities.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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