Simba Energy Inc. Signs Memorandum of Understanding to Farmout in Kenya
Simba Energy Inc. Signs Memorandum of Understanding to Farmout in KenyaSimba Energy Inc. SMB 5/13/2013 10:05:00 AMSimba Energy Inc. Signs Memorandum of Understanding to Farmout in Kenya
Simba Energy Inc. Signs Memorandum of Understanding to Farmout in Kenya
Vancouver, British Columbia CANADA, May 13, 2013 /FSC/ - Simba Energy Inc. (TSXV: SMB, Frankfurt: GDA, OTCQX: SMBZF),("Simba"), the onshore pan-African oil and gas explorer with assets in Kenya, Guinea and Chad, is pleased to announce that it has signed a memorandum of understanding (the "MOU") with Ajax Exploration Ltd. ("Ajax"), a privately-owned oil and gas company, to farmout a 66% interest and operatorship of Block 2A, onshore Kenya ("Block 2A").
The MOU, which is to be superseded by definitive farmout agreement (the "Farmout Agreement") that Simba expects to be finalized and executed shortly, is intended to set out the principal commercial terms of the farmout only, which are as follows:
Highlights of MOU:
. The transaction provides a significant investment in Simba's Kenya asset, delivering a fully carried pre-drill exploration program and a commitment to drill and carry Simba for one exploration well
. Ajax is to commit to a work program including drilling one well for Simba representing a gross investment of up to US$36.5 million (assuming a well cost of US$25 million in Kenya)
. Ajax will pay Simba up to US$3.1 million in back costs. In addition, Ajax will provide a net carry of up to US$12.4 million (assuming a well cost of US$25 million)
The MOU provides that upon execution of the Farmout Agreement, Ajax is to advance to Simba a loan of the sum of US$1,300,000 (the "Loan") to cover some back costs incurred by Simba prior to the effective date of the Farmout Agreement and to concurrently issue a 2 year convertible loan note (the "Loan Note") to evidence the Loan. The Loan is to be extinguished and the Loan Note cancelled if and when the Farmout Agreement receives Kenyan government approval and Simba transfers the 66% interest in Block 2A to Ajax. Simba anticipates receiving government approval later this year after executing the Farmout Agreement and transferring the 66% interest to Ajax shortly thereafter, said Agreement and transfer subject to Kenya government approval; however, if such approval and transfer has not occurred within 365 days after signing of such Farmout Agreement, or in the event of default under the Loan Note, then Ajax may elect to convert the Loan into Simba common shares at a conversion price of C$0.075 per share during the first year, or C$0.10 per share thereafter. The Loan is to bear interest at a rate of 3% and permit Simba to prepay a minimum of US$250,000 at any time without penalty. In addition, the Loan Note will restrict Simba from creating, incurring or permitting the subsistence of any security interest over the Kenya production sharing contract or related assets, or from creating any indebtedness or securities or entering into any other obligation that ranks in priority to the Loan Note.
Hassan Hassan, Managing Director of Operations stated, "The MOU with Ajax provides Simba and its stakeholders with the opportunity to accelerate its exploration program in Kenya. Simba's first farmout agreement provides an attractive valuation marker for part of its asset portfolio and delivers the required funding for our upcoming exploration campaign."
Andrew Shrager, Chairman of Ajax said: "This MOU represents a second step in our relationship with Simba for its Kenya exploration block. In 2012, our associate, GeoDynamics Worldwide srl conducted a broad based grid Passive Seismic survey which identified potential areas for further exploration efforts. We now intend to apply our suite of technologies with the aim of speeding up the exploration phase, and drill our first well in late 2014."
The Farmout Agreement will be subject to governmental approval, and the terms of the Farmout Agreement and the Loan will also be subject to receipt of acceptance for fi
