Caspian Energy Ltd. (CEL) has entered into an agreement to sell a 10% interest in Aral Petroleum Capital LLP (Aral) to AsiaStar Petroleum Limited. CEL currently holds an aggregate 50% interest in Aral, which it operates as a joint venture together with Azden Management Limited ("Azden") which holds the remaining 50% interest in Aral.

The sale of 10% of Aral equates to a disposition of 20% of CEL's total interest in Aral. Pursuant to the agreement, CEL will sell a 10% interest in Aral to the Purchaser, and Azden will sell all of its 50% interest in Aral to the Purchaser, resulting in the Purchaser holding a 60% interest in Aral and CEL holding a 40% interest in Aral. The agreement is subject to a number of conditions precedent that must be satisfied during the next three months in order for the transaction to close, and also remains subject to the receipt of all regulatory approvals including without limitation, the approval of the Toronto Stock Exchange and approvals of the government of Kazakhstan.

As part of the transaction, it will be the Purchaser's responsibility to secure US $80MM in debt financing for Aral for further exploration and development. If the Purchaser is able to arrange this debt financing, this transaction will achieve several strategic imperatives. It will provide the funding necessary to develop the East Zhagabulak field, phase one of which envisages the immediate drilling of development wells. It will provide the funding required for a sustained exploratory drilling campaign in the Greater Zhagabulak, Baktygaryn, and Urikhtau areas, among others. Finally, it should ensure that Caspian will not have to provide additional funds for the activity in the North Block in the near term.

In consideration of acquiring a 10% interest in Aral from CEL, the Purchaser is required to enter into a facility agreement with CEL pursuant to which the Purchaser will, subject to the fulfillment of certain conditions precedent, advance up to US $6MM in loans to CEL in three, US $2MM tranches over a two year period. These loans will have a ten year term, and will bear interest at a rate of 10% per annum during the first five years and 18% per annum during the second five years. The loans are to be repaid from dividends received by CEL from Aral.

Tags: Caspian Energy Inc.