OilVoice - Roxi Petroleum Announces Sale of Galaz Interest

Roxi Petroleum Announces Sale of Galaz Interest

Thursday, February 11, 2010

Roxi Petroleum announces that, together with its partner, Roxi's indirect 59 per cent. owned subsidiary Galaz Energy BV ('GEBV'), it has agreed through back to back agreements to sell a 40 per cent interest in the operating company for the NW Konys Field, Galaz and Company LLP ('Galaz') to the Korean multinational trading company LG International Corp. ('LGI') for US$15.6 million. In addition, LGI will pay US$8.4 million for a 40 per cent. interest in existing debt of an equivalent value, which will be repayable through future production. LGI will also provide financing to Galaz of up to $26 million for appraisal and development of the NW Konys field. Management considers these funds will be sufficient to finance this project through to commercial production. GEBV currently has a 73.4 per cent. interest in Galaz, but as part of the back to back agreements GEBV will acquire a 24.6 per cent of Galaz from its other local partners. Following the sale of 40 per cent. of its interests to LGI, GEBV will retain a 58 per cent. interest in Galaz.

As part of the above arrangements, Roxi has varied the terms of the previous agreement with KazRozMunai LLP, announced on the 19 November 2008, such that GEBV will now pay for services provided towards the work programme, rather than transferring any equity participation in Galaz to KazRozMunia LLP. Together the above are referred to as the 'Galaz Agreements.'

The Galaz Agreements are subject to due diligence by LGI and the receipt of certain waivers from the regulatory authorities. However, if the Galaz Agreements are completed as expected by Roxi management, the company will retain an indirect 34.2 per cent. participating interest in Galaz, and be provided with approximately US$10 million funding available for other assets.

David Wilkes, CEO of Roxi Petroleum said:
'Completion of the Galaz agreement with LGI will mark a turning point for Roxi. Not only would we retain a meaningful interest in this producing asset, but we would secure substantial funding of its work programme commitments. This together with our recent completion of our farm out deals with Canamens puts Roxi in a strong position to develop its existing assets and achieve production by the end of the year.'