RE: Carnavron28 Jan 2021 11:35
Carnarvon has entered into a binding farm-out agreement with AIM listed, Advance Energy Plc (“Advance”) by which Advance will acquire up to 50% in the Buffalo project by funding the drilling of the Buffalo-10 well up to US$20m on a free carry basis. In addition, the newly formed joint venture will acquire development funding from third party lenders and any additional funding requirements (in addition to the provided by third party lenders) will be provided by Advance as an interest free loan. In the event Advance raises less than US$20m for the Buffalo-10 well, but more than US$10m, the transaction will still proceed, however at a lower equity level for Advance. Effectively, Advance’s equity level is 2.5% per US$1m contributed to the joint venture.
As such, the transaction is subject to Advance transferring at least US$10m to the joint venture bank account by 31 March 2021, customary government approvals and Advance obtaining shareholder approval in accordance with AIM rules. This transaction is an important element of Carnarvon’s strategic objective to drill the Buffalo-10 well whilst carefully managing its balance sheet.