Adira Energy Ltd. has entered into a series of agreements to farm-out part of its interest in the Yitzhak license to strengthen its operating and business profile in the License and to reduce its working interest from 85% to 60%. The Company also announces employee option grant.
Through the Company's wholly-owned subsidiary, Adira Energy Israel Ltd, the Company has entered into a Farm-out Agreement with the AGR Group to farm-out 5% of the working interest in the License to AGR. Such interest is to be carried by the below mentioned License Owners through exploration. In addition, AGR will pay Adira a 3% overriding royalty interest on AGR's share of revenues from sold petroleum, until repayment of AGR's expenditures in the work program and 4.5% ORRI from that date forward. Subject to the terms and conditions set out in the said Farm-out Agreement, in the event Adira solicits a strategic investor into the License, AGR will reduce its working interests pro rata to the entry of such investor. Pursuant to the agreement, AGR will be designated Lead Operator in accordance with Israeli regulations defining 'Operator', with the continued involvement of Adira as Co-operator. In addition, AGR has been appointed as engineering services contractor on the License with continued involvement of Adira as part of the core professional team led by AGR.
The Company has also entered into a Farm-out Agreement with Ellomay Oil and Gas 2011 LP, a limited partnership whose general partner is a wholly-owned subsidiary of Ellomay Capital Ltd., to farm-out 20% of the working interest in the License to Ellomay. Pursuant to the Agreement, Ellomay will reimburse Adira for its proportionate share of the costs incurred by Adira to date of closing, plus interest at LIBOR + 1%. Ellomay will also pay Adira a 3% ORRI on Ellomay's share of revenues from sold petroleum, until repayment of Ellomay's expenditures in the work program plus interest and 4.5% ORRI from that date forward. Subject to the terms and conditions set out in the said Farm-out Agreement, in the event Adira solicits a strategic investor into the License, Ellomay will reduce its working interests pro rata to the entry of such investor.
In addition, Adira has formalized a Letter of Intent with Brownstone Energy Inc. in respect of the License, enabling the formal registration of Brownstone's 15% working interest, in the Petroleum Registry.
The above-mentioned farm-outs are subject to the approval of Israel's Petroleum Commissioner.
Following approval of the above mentioned farm-outs, Adira will hold 60%; Ellomay 20%; Brownstone 15%; and AGR 5% of the License. The License Owners will negotiate a Joint Operator Agreement to regulate the commercial relationship in respect of the License.
Hezi Kugler, Chief Executive Officer, stated: 'We are fortunate to have attracted farm-in partners like AGR and Ellomay, in addition to Brownstone. The Yitzhak license, with its resource estimates of gas and condensate, presents an excellent opportunity forAdira and its partners to develop the license in a short time frame, and commence drilling by Q4 2012. We have significantly reduced financial exposure and continue to de-risk the Yitzhak License while obtaining international acclaimed engineering support and substantial financial backing from recognized partners in the field.'