Canada-based Adira Energy has entered into a series of agreements with Tohar Hashemesh to farm-out part of its licenses.
In the agreements the company will farm out five percent of its working interest in its Gabriella license, ten percent of its Yitzhak license, and ten percent of its Samuel license to reduce its future financial commitments.
In return, the company will receive about $3.2m, in which $1.6m will be reimbursed for representing 50% of Adira’s past costs incurred on the licenses and the remaining 50% (about $1.6m) will be paid upon registration of Tohar Hashemesh’s interest with the Ministry.
Adira Energy CFO, Gadi P. Levin, said: "This transaction is part of our stated goal to leverage the working interests in our licenses to attract new partners who will share in the investment required to prove up these blocks."
Under the terms of the agreements, Adira Energy will be carried for a further 2.5% of its own working interest through to the completion of the first exploration well, including testing, in the Gabriella license.
Until 31 March 2013, Tohar Hashemesh has an option to farm into an additional ten percent of the company’s working interests in Yitzhak and Samuel, and it will be responsible for the funding obligations in respect of the options.
Tohar Hashemesh will also pay a three percent overriding royalty interest (ORRI) to Adira on its share of revenues from petroleum sold on all the licenses, until repayment of Tohar Hashemesh’s expenditures in the work program and 4.5% ORRI from that date forward.
The agreements also allow Adira Energy to solicit additional working interest partners into the licenses and in such a situation Tohar Hashemesh will reduce its working interest pro rata to the entry of the new partner. The transaction is subject to standard closing conditions.
After the approval of the agreements, Adira will hold ten percent of the Gabriella license (in addition to the 15% back in option), 50% of the Yitzhak license and 31.25% of the Samuel license, which exclude the options granted to Tohar Hashemesh.
Adira Energy said that the company has received a further extension of the date from the Ministry of Energy and Water of the State of Israel for the execution of a drilling contract on the Samuel license offshore.