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Roxi Petroleum tanks 25% after NK20 well disappoints

Last updated: 08:20 27 Jan 2011 GMT, First published: 09:20 27 Jan 2011 GMT

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Shares in Roxi Petroleum (LON:RXP) plummeted 25.5% this morning after the Kazakhstan focused company said that initial log evaluation and core indicated that the target Arskum formation is not hydrocarbon bearing.

The company logged the NK20 well after it was drilled to a total depth of 1,600 metres.

As the NW Konys field cores also revealed no significant visual hydrocarbon shows, final evaluation will be confirmed by core analysis, which is currently in progress, said Roxi.

“Although the results of NK20 are less favourable than NK22, both wells indicate encouraging potential for the newly extended area for Galaz.

“We will now continue to focus on the development of NW Konys to achieve early production from the existing wells drilled in 2009, following receipt of the final permits, as well as evaluate the new production well locations as part of the next phase,” said chief executive of Roxi Petroleum David Wilkes.

The company also announced that it has signed an agreement with LG International Corp (LGI) to confirm distribution of revenue from Galaz.

LGI will provide US$17.5 million project funding for the development of NW Konys field during the initial period.

Under the terms of the agreement, any revenue derived from initial production will be repaid to its partners in proportion to the loan funding provided by each partner relative to total loan funding provided to Galaz.

LGI will lend US$34.4 million to the project as part of the deal to purchase their 40% interest which, when aggregated with the US$3.2 million loan funding from GEBV and US$4.9 million provided as loans from Roxi Petroleum, will give total debt due from Galaz of US$42.5 million to its partners.

When LGI’s project funding is over, revenues will first be used to finance capital expenditure (capex) and G&A costs of Galaz and then used to repay loans to partners in proportion to their funding on a weighted average basis to total debt.

Once all loans are repaid, all net income will be distributed to Galaz shareholders in accordance with their equity interest in Galaz LLP, which is LGI 40%, GEBV 58% and other minorities 2%.

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