Equator Exploration Limited announces the signing of a settlement agreement with Peak Petroleum Industries Nigeria Limited ('Peak').
On 26 September 2007, the Company approved a settlement agreement ('Settlement Agreement') with Peak. Under the terms of the Settlement Agreement, Peak will assume full responsibility for financing and developing the Bilabri field which to date has been financed by Equator under the Finance and Service Agreement between Peak and Equator Exploration (OML 122) Limited, dated 2nd April 2005 ('FSA').
The Settlement Agreement provides that the FSA will be terminated and that Equator will retain a net profit interest of 5% in the Bilabri oil project and a paying interest of 12.5% in any gas development of the Bilabri and Owanare fields.
The Settlement Agreement also provides for Peak to assume the current and future liabilities of the Bilabri oil development and to reimburse Equator for all project costs paid by the Company since 1 June 2007. Peak is negotiating new contracts for the services and equipment required for the Bilabri oil development to continue.
Peak is expecting to conclude a financing agreement with a financial institution in the near term.
To date, Equator has invested approximately US$270 million in OML 122 including the Owanare discovery well. The directors of Equator have reviewed the potential financial implications of the Settlement Agreement for the Company and will be making suitable provisions to reflect a prudent view of any downside risk in terms of recoverability of the historical cost of investment in OML 122. The provisions will be recorded in the Company's financial statements which are expected to be issued shortly.
