CALGARY, Oct. 10, 2012 /CNW/ - Shona Energy Company, Inc. (TSXV: SHO)("Shona" or the "Company"), today announced that its wholly-owned subsidiary, Geoproduction Oil and Gas Company of Colombia ("Geoproduction"), has signed a Letter of Intent ("LOI") with Altenesol LNG Colombia, S.A.S. ("Altenesol") to supply natural gas for Altenesol's Nataly I liquefied natural gas ("LNG") Project (the "Project"). Under the terms of the LOI, Geoproduction has agreed to enter into negotiations for a Definitive Agreement that will provide the following:
|1)||Sale of 17 million cubic feet per day (MMCFD) of natural gas for a period of ten years. Based on initial discussions, the starting price will be negotiated within a range of $4.50 to $5.25 per MCF with an annual price escalation. The structure of the contract will be on a "take or pay" basis for both parties.|
|2)||The parties have an option to extend the contract five years dependent on the results of the four- to five-well drilling program that Geoproduction will commence in mid 2013.|
|3)|| Milestones to be completed by Altenesol over the next six months that include, but are not limited to:
- the execution of a Definitive Agreement between Geoproduction and Altenesol by December 1, 2012;
- the conversion of existing end user LOIs to definitive agreements;
- the ordering of equipment, and
- the initiation of construction of an LNG plant.
Altenesol estimates that it will require approximately 17 MMCFD of natural gas for its planned Nataly I LNG Plant and intends to construct the plant in Colombia's Cordoba Province - near Geoproduction's Jobo Station which processes the natural gas produced from Geoproduction's Esperanza Block. Altenesol anticipates the plant will be completed in approximately two years and plans to transport and market the LNG product once the plant becomes operational.
"Altenesol's Project is an innovative approach to marketing natural gas in Colombia. If the milestones required to finalize this Project are met, it would more than double our natural gas sales volume and significantly increase long-term cash flow," said James L. Payne, Chairman and CEO of Shona Energy. "Based on the encouraging results of the recently completed 3-D seismic survey of Esperanza and our existing development and exploration project inventory, we believe that our reserves exceed those required to meet the commitments of the potential agreement. Shona is proactively planning a four- to five-well drilling program in 2013 to establish additional reserves in order to fully commit to the proposed five-year term extension and establish a basis for other gas contracts."
Shona's planned four- to five-well drilling program in 2013 will target only 3-D seismic-defined exploration prospects. It is anticipated that any additional exploration and development drilling on the block will be in response to future gas sales agreements. Funding for the 2013 drilling program is anticipated to come from existing cash and future cash flow.
The Collarini Associates NI 51-101 compliant reserves report effective January 1, 2012 assigned Shona's Esperanza Block 2P natural gas reserves of 95 billion cubic feet ("Bcf") and possible reserves of 78 Bcf. In June 2012, Shona completed its fourth seismic program with the acquisition and processing of 103 square kilometers of 3-D seismic and 14 kilometers of 2-D seismic on the Esperanza Block.
|(1) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable reserves.|
The signing of a Definitive Agreement with Altenesol is subject to, among other things, the negotiation of the gas sales price and milestones for the development of the project. There can be no assurance that a Definitive Agreement will be consummated or, if consummated, will contain some or all of the conditions expressed herein. Geoproduction anticipates that it will sign a Definitive Agreement with Altenesol in the fourth quarter of 2012, assuming negotiations are successful.
About Altenesol LNG Colombia, S.A.S.
Altenesol LNG Colombia S.A.S. is a company created under the laws of the country of Colombia with a primary focus on the production and marketing of LNG in Colombia as it relates to green projects in the alternative energy industry. Altenesol LNG Colombia falls under Altenesol Colombia S.A.S, a Colombian holding company which is a subsidiary of Altenesol, LLC a USA company formed in 2009 under the laws of the State of Florida. The main objective of Altenesol is to provide a variety of alternative energy services including capture, cleaning, compressing and transporting of associated gases in remote locations; LNG production, transportation and re-gasification; alternative energy engineering consultation; sales of LNG/LCNG (liquid-to-compressed natural gas), natural gas vehicle equipment; and natural gas vehicle stations and conversions. Altenesol, LLC is a subsidiary company of IAHL Corporation and common shares of IAHL Corporation trade on the OTC under the stock symbol "IAHL".
Shona is an international oil and natural gas exploration, development and production company focusing on South America, specifically Colombia and Peru. The Company's assets currently include interests in the Company-operated Esperanza block located in Colombia's Lower Magdalena Basin, the non-operated Serrania, Los Picachos and Macaya Blocks in Colombia's Caguan Basin, and the non-operated Block 102 in Peru's Maranon Basin. The common shares of the Company trade on the TSX Venture Exchange under the stock symbol "SHO" and the OTCQX International under the stock symbol "SHOAF". More information on the Company is available at www.shonaenergy.com.
Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, expectations regarding future oil and gas production from the Company's properties, the production capacity of the Company's properties, the anticipated use of seismic data and exploration and development plans on properties in which the Company holds an interest. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Shona believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because Shona can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: the ability of Shona to complete transactions described in this press release, the timely receipt of any required regulatory approvals, the performance of existing wells and success obtained in drilling new wells, anticipated expenses, cash flow and capital expenditures, the application of regulatory and royalty regimes and prevailing commodity prices and economic conditions. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. Shona undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures.
All dollar references in this press release are to U.S. Dollars.
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 press release.
SOURCE: Shona Energy Company, Inc.
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