(Sharecast News) - Coro Energy has entered into an option agreement with an existing operator in Italy, it announced on Wednesday, for the sale of its Italian natural gas asset portfolio, for up to €7.5m (£6.32m).
The AIM-traded firm said that, following structural increases in global gas prices, it relaunched its Italian gas asset portfolio earlier in the year.
It said the portfolio had since delivered "significant" free cash flows for the group.
The company, however, explained that it remained primarily focused on south east Asia, and the "significant" growth and investment opportunities in the region.
Following unsolicited approaches for the Italian portfolio, in expectation of near-term and long-awaited developments on the Duyung PSC, and with a view to capturing the value inherent in the Italian portfolio following recent gas price rises, Coro said it had awarded a five-month option, with a possible two-month extension, to privately-owned Italian gas operator Zodiac Energy.
It said Zodiac had the right to acquire 100% of the issued share capital of Coro Europe, its wholly-owned subsidiary which in turn holds 100% of the issued share capital of Apennine Energy - the group entity holding the company's interests in the Italian portfolio.
Total receipts from a disposal under the option would be up to €7.5m, of which €6m would be paid in cash at or before completion, and further contingent payments of up to €1.5m through a 10% net profit interest in the Italian portfolio over the three years from completion of disposal under the agreement.
The company said it retained full ownership and cash flows from the portfolio before the completion of the disposal.
It said the Italian portfolio produced around 0.6 million cubic feet per day in the second quarter net to the Company, or 100 barrels of oil equivalent per day, and generated free cash flows to the firm of €0.45m in July.
The optionholder had already paid a non-refundable €0.3m deposit.
"The proposed divestment is fully in line with the company's strategic objectives, enabling Coro to focus exclusively on growing its oil, gas and clean energy portfolio in south east Asia where demand for energy and the opportunity for material expansion remain very strong," said chairman James Parsons.
"The proposed divestment provides an immediate cash payment and the ability to retain cash flows from the Italian portfolio in the near term prior to any disposal, whilst also securing a fixed priced exit."
Parsons said the combination of the option cash consideration, the retained net profit interest, and the cash flows delivered by the Italian portfolio under Coro's continued ownership in the current gas price environment, would be expected by the board to be around €10m.
"We look forward to updating investors both in respect of developments regarding the Italian portfolio, the option and on our projects in south east Asia in due course."
At 1506 BST, shares in Coro Energy were up 0.37% at 0.3p.
Reporting by Josh White at Sharecast.com.
Coro Energy (CORO)