CALGARY, Feb. 16, 2012 /CNW/ - Canadian Overseas Petroleum Limited
("COPL" or the "Company") (XOP: TSX-V) announces today that its Sale
and Purchase Agreement ("SPA"), dated June 7, 2011, with BG
International Limited ("BG") pertaining to License P.089, relating to
Block 22/15, and License P.101, relating to Block 23/21 Rest of Block
Shallow ("RoB") has been terminated.
The termination of the SPA is a result of a dispute over additional
funds required to be deposited by COPL into the escrow account
established under the SPA. Under the SPA, COPL was required at first
to maintain funds in the escrow account for 75% of BG's estimated dry
hole costs for the Esperanza, Newt, Lower Toad and West Columbus wells.
If testing of the wells was required (a contractual determination on a
pre-determined minimum hydrocarbon intersection), the escrow account
was required to be topped up by 75% of the estimated testing costs on
notice from BG. Additional funds for escrow could also be called by BG
if a well was forecast by BG to experience significant cost overruns.
The escrow account experienced a larger than budgeted draw down by BG
(£22 million or CDN$33.6 million) because of significant cost overruns
incurred (59%) during the drilling and testing of the BG operated
Esperanza well in the fourth quarter of 2011. After a sustained effort,
COPL elected not to top up the escrow account as required pursuant to
the terms of the SPA once alternative proposals to do so were rejected
by BG. This resulted in BG delivering a termination notice to COPL.
COPL considers termination the best course of action when comparing the
dilutive impact of completing an equity financing to top up the escrow
account to the levels requested by BG, to the value of its portfolio of
projects in the UK and West Africa.
As a result of the termination notice, COPL will not participate in any
further drilling in Block 23/21, which includes the Lower Toad, Newt
and West Columbus exploration prospects and the Upper Toad discovery.
COPL currently has under deposit approximately £10.1 million
(approximately CDN$16.2 million) in the BG escrow account, and £5.2
million (approximately CDN$8.3 million) in the SSE E&P UK Limited
escrow account to date for exploration drilling in Block 23/21. Under
the SPA, COPL is obligated on termination to pay for 75% of certain of
BG's accrued costs for the planned drilling of the Block 23/21 wells.
COPL has communicated to BG that, given all payments and obligations for
the drilling and testing of the Esperanza well have been made by COPL,
COPL believes it retains all its rights in Block 22/15.
The termination notice does not impact COPL's status and rights for
other properties in the UK in which the Company is not involved with
BG, including Blocks 206/5a and 206/10a (the Fulla and Freya
discoveries) and Blocks 15/24c and 15/25f (the Bluebell exploration
COPL's focus continues to be on oil exploration in deep-water turbidite
sands on the West African continental margin, and in tertiary turbidite
sands in the UK Central North Sea. To this end, the Company continues
to work towards closing its previously announced transaction in
Liberia, and expects in the near term to commence operations at
Bluebell in the UK Central North Sea.
About the Company
COPL is an oil and gas exploration company focused in the UK North Sea,
and the offshore West African continental margin. COPL's Common Shares
are listed under the symbol "XOP" on the TSX Venture Exchange.
Forward Looking Statements
This press release may contain forward-looking statements based on
COPL's current expectations and assumptions as to a number of factors
including weather, regulatory approvals and general economic and
industry conditions. If those expectations and assumptions prove to be
incorrect, or factors change, then actual results could differ
materially from the forward-looking statements contained in this press
Generally, statements included in this press release that address
activities, events or developments that COPL expects, believes or
anticipates will or may occur in the future are forward-looking
statements. Such forward-looking statements involve substantial known
and unknown risks and uncertainties, certain of which are beyond COPL's
control, including: the impact of general economic conditions in the
areas in which COPL operates, civil unrest, industry conditions,
changes in laws and regulations including the adoption of new
environmental laws and regulations and changes in how they are
interpreted and enforced, increased competition, the lack of
availability of qualified personnel or management, fluctuations in
commodity prices, foreign exchange or interest rates, stock market
volatility and obtaining required approvals of regulatory authorities.
In addition there are risks and uncertainties associated with the oil
and gas industry, therefore COPL's actual results, performance or
achievement could differ materially from those expressed in, or implied
by, these forward-looking statements will transpire or occur, or if any
of them do so, what benefits, including the amounts of proceeds, which
COPL will derive therefrom. Such statements are based on assumptions
made by COPL based on its experience perception of historical trends,
current conditions, expected future developments and other factors it
believes are appropriate in the circumstances.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
SOURCE Canadian Overseas Petroleum Limited
For further information:
Mr. Arthur Millholland, President and CEO
Rob Elgie, Manager of Investor Relations
Pelham Bell Pottinger Public Relations
James Henderson, Managing Director or Mark Antelme
Phone: +44 207 861 3160