Carnarvon Petroleum (ASX:CVN) has entered into an agreement with Loyz Oil Thailand Pte Ltd to settle the deferred consideration payable to Carnarvon by Loyz.
The deferred consideration will be settled by a lump sum payment of US$4 million (A$5.3 million) which is payable to Carnarvon by 30 June 2017.
In addition to this, Carnarvon is entitled to 12% of any sale proceeds over US$45 million, should Loyz sell the asset in the future.
Adrian Cook, managing director for Carnarvon, commented:
“We saw this as a tremendous opportunity to draw forward an additional US$4 million and strengthen the Company’s cash position at important time for Carnarvon.
"In making the decision to enter the settlement agreement, we were mindful of the financial position of Loyz and the fact that Carnarvon is planning to drill two incredibly significant wells in the next twelve months, namely Dorado-1 and Phoenix South-3."
"A more robust balance sheet leading into this period gives us greater optionality and financial strength to cater for a broader range of outcomes, most particularly in the success case."
If Loyz unable to settle
In a situation where Loyz is unable to settle some or all of the US$4 million by 30 June 2017, it is obligated to satisfy the balance through the issue of shares in the Singapore listed parent of Loyz Oil Thailand Pte Ltd, namely Loyz Energy Limited.
Dorado-1
Planning has commenced on the Dorado-1 exploration well that is targeting 545 bscf of gas and 31 million barrels of condensate (that is 127 mmboe).