VANCOUVER, Canada – EnerGulf Resources Inc. has entered into a letter of intent (LOI) with Texas South Energy Inc. to participate in six offshore prospects in the Gulf of Mexico.
Subject to the execution of definitive agreements and the company’s financial obligations therein, the LOI provides for participation in drilling one well on block 378, Vermilion Area, South Addition (Canoe prospect) and a second well on either the Canoe prospect or block 375, Vermilion Area, South Addition (Selectron Shallow prospect).
The company has made a $200,000 payment for its interest in the Canoe prospect. On June 27, 2016, it will pay an additional $200,000 for its interest in the Selectron Shallow prospect. Upon payment, it will own a 43.75% non-operated working interest and will have certain cost interest obligations in the Canoe and Selectron Shallow prospects.
The LOI also provides for the payment of $400,000 on June 27, 2016, for the acquisition of an undivided 25% non-operated working interest in the following subsalt prospects: block 870, Ewing Bank and block 914, Ewing Bank (Alpha prospect); block 904, Ewing Bank and block 948, Ewing Bank (Beta prospect); block 348, Ship Shoal, South Addition (Baryon prospect); and block 371, Eugene Island, South Addition (Proton prospect). All blocks are operated by GulfSlope Energy Inc.
As additional consideration, EnerGulf has agreed as a term of the definitive agreement to issue to Texas South a warrant to purchase up to seven million common shares of the company exercisable for a three-year term at a price of CDN$0.06 per share.
If EnerGulf fails to meet any payment obligation under the LOI, it will lose the right to participate in the prospect to which such non-payment applies. Furthermore, its participation right in any funded prospects will be reduced proportionately based on the actual payments made relative to the total payment obligations under the LOI.
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