LONDON (Alliance News) - Andes Energia PLC Tuesday said an agreement has been reached with Trayectoria Oil and Gas to provide cash guarantees and working capital for three of its exploration blocks in Colombia, whilst also repaying some of Andes existing debt.
Trayectoria, a Colombian exploration and production company, will provide cash guarantees of USD5.0 million for the blocks acquired by Andes in the 2012 licensing round and a further USD1.2 million of working capital to progress technical studies and development.
Trayectoria will also assume the obligation to repay USD7.0 million of Andes existing debt.
The agreement means Andes will have six guarantees in place for eight of its blocks acquired in the 2012 licensing round. Andes can take advantage of a further USD3.9 million from Trayectoria to guarantee the two remaining blocks as part of the agreement. Andes are expecting the two remaining blocks to need the guarantees in the next 12 months.
Upon completion of the funding agreement of USD13.2 million, Andes will issue 16.8 million new shares at 47 pence per share. As a consequence, Trayectoria will hold 3.16% of the current outstanding shares of Andes.
Andes Energia shares were down 1.3% to 46.25 pence per share Tuesday morning.
Andes has the option to acquire two Colombian producing blocks from Trayectoria for USD12.0 million with potential for shale oil production under the agreement.
If Andes exercises the option to buy the two assets, it will issue a further 15.3 million shares at 47 pence each, which would increase Trayectoria's interest in Andes to 5.87%.
The two blocks have the potential to add initial net production of 150 barrels of oil equivalent per day to the company, 1.7 million barrels of oil equivalent of proved and probable reserves, and 60 million barrels of oil equivalent of prospective shale resources, it said.
Trayectoria also will provide financing options or source funds to finance the 3D seismic program committed in the 2012 bidding round. The value of the program is approximately USD10.0 million.
"The funding of our guarantees in Colombia, reduction of our debt and the option to acquire reserves and production in Colombia in the future, further strengthens Andes' cash flow, capital structure and our exploration and development execution capabilities," said Chief Executive Alejandro Jotayan in a statement.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2014 Alliance News Limited. All Rights Reserved.
