Taipan Resources Inc. ("Taipan") (TSX VENTURE:TPN), through its wholly owned Kenya-based subsidiary Lion Petroleum Corp., has signed a binding farm-out agreement with Tower Resources (Kenya) Limited, a subsidiary of AIM-listed Tower Resources plc (LN:TRP) ("Tower"), whereby Tower will acquire a 15-per-cent participating interest in Block 2B onshore Kenya. Taipan will retain a 30-per-cent operated interest in Block 2B.
The principal terms of the farm-out agreement are as follows:
- Tower will pay to Taipan US$4.5-million in cash at completion;
- Tower will issue to Taipan 9-million shares in Tower Resources Plc in two tranches (the "Farm-In-Shares), 50% at completion and 50% three months following completion;
- Tower will make a US$1.0-million payment to Taipan conditional upon the spud of a second well in Block 2B;
- Completion is conditional solely on approval from Premier Oil Investments Limited;
- Tower will, on and from the effective date of transfer, pay its participating interest share of costs incurred in conducting joint operations as per the provision of the joint operating agreement, the initial phase of which, are estimated to cost gross US$29.5 million;
- Tower will provide guarantees for its share of the minimum work and expenditure obligations required under the PSC for Block 2B;
Taipan, is presently preparing to drill the Badada Prospect on Block 2B in Kenya. The Badada prospect has been independently estimated by Sproule International Limited ("Sproule") to have Mean Gross Unrisked Prospective Resources of 251 MMBOE and High (P10) Estimate Gross Unrisked Prospective Resources of 498 MMBOE. The total estimated Mean Gross Unrisked Prospective Resources on Block 2B is 1,593 MMBOE based on 19 exploration leads1.
Taipan, through its subsidiary Lion Petroleum will retain operatorship of Block 2B during the exploration phase.
Maxwell Birley, Chief Executive Officer, commented: "We have further de-risked our prospect in Block 2B with this farm out to Tower. The farm out to Tower is being completed at a favorable premium to the farm down to Premier announced in December of last year, and is reflective of the increased sentiment towards the value of our acreage in Block 2B. Between this farm down and the recent private placement, Taipan is now fully-funded and exposed to the drilling of a well on each of Block 1 and Block 2B in 2014. We have now set our sights not only on the drilling of these two exciting targets, but also on other sub-Saharan assets which will allow us to expand our portfolio of exploration assets in 2015 and beyond".