The Sfax Offshore Exploration Permit
The Corporation has entered into a joint operating arrangement with DNO Tunisia AS (“DNO Tunisia”) and with Atlas Petroleum Exploration Worldwide Ltd. (“APEX”), pursuant to which the joint venturers agreed to undertake exploration, evaluation and extraction activities on the Sfax offshore permit (the “Sfax Permit”), located in Tunisia, and targeting oil and natural gas reserves. On July 30, 2018, Panoro Energy ASA (“Panoro”), an independent exploration and production company based in London, England and listed on the Oslo Stock Exchange, acquired 100% of DNO Tunisia, following which Panoro became the operator of the Sfax Permit (the “Operator”).
Following completion of the transaction, Panoro assumed responsibility for all drilling and other obligations associated with the Sfax Permit, including any monetary penalties arising due to non-fulfillment of work commitments agreed to under the terms of the Sfax Permit. The Corporation holds a 5.625% working interest in the Sfax Permit, subject to certain cumulative revenue thresholds and priority recovery of expenditures.
Under the terms of the joint operating agreement, the Operator will pay 12.5% of the profit oil or profit gas component of production from the Sfax Permit, to a maximum of US$125 million (or 12.5% of the profit oil or profit gas from the production of 75 million barrel of oil equivalents, whichever comes first) to the Corporation and to APEX. Thereafter, the Corporation and APEX are entitled to 6.25% of the profit oil or profit gas component of production from the Sfax Permit to a maximum of an additional US$75 million (or 6.25% of the profit oil or profit gas component from the production of an additional 45 million barrel of oil equivalents, whichever comes first). In addition to their entitlement to a share of the profit oil or profit gas, the agreement with DNO Tunisia also provides the Corporation and APEX with entitlement to receive 20% of the cost oil or cost gas component of production from the Sfax Permit, to a maximum of the lesser of 18% of the costs incurred by the Corporation and APEX prior to completion of the joint operating agreement, or US$20 million.
The Corporation is entitled to 45% of any payments made by the Operator under these arrangements. The Corporation and APEX have conceded a temporary deferral of 50% of their entitlement to a share of the profit oil or profit gas component of production from the Sfax Permit, as outlined above, until such time as the Operator recovers $150 million of total incurred costs, including costs incurred by the Operator from the cost oil or cost gas component of production on the Sfax Permit.