Int'l Frontier signs drill service LOI with Simmons
2020-12-10 08:29 MT - News Release
Mr. Steve Hanson reports
IFR SIGNS LETTERS OF INTENT FOR INVESTMENT AND DRILLING SERVICES WITH SIMMONS EDECO FOR UP TO $7 MILLION USD
International Frontier Resources Corp. and Tonalli Energia, a joint venture between Mexican petrochemical leader Grupo Idesa and International Frontier Resources, have signed a letter of intent with Simmons Edeco, a Canadian-based oil field service corporation, and its financing affiliates. The investment is set out in two tranches of $1-million (U.S.) and up to $6-million (U.S.), which are subject to certain conditions being met.
Proposed terms of the transaction
Tranche A financing
Under the terms of the tranche A letter of intent, it is anticipated that the parties will enter into a binding agreement, pursuant to which Simmons will contribute $1-million (U.S.) for development capital at Tonalli's Tecolutla block in the state of Veracruz, Mexico. The estimated total capital required for the TEC-12 work program is estimated to be $1.5-million (U.S.).
As consideration for the investment, IFR Group will grant to Simmons a prepayout royalty from revenue generated from the Tecolutla block. After the payout has been satisfied, a reduced royalty on existing production will be payable for the life of the field.
Tranche B financing
Under the terms of the tranche B letter of intent, the parties are interested in exploring and negotiating a business agreement, pursuant to which Simmons would provide financial and service support in an amount of up to $6-million (U.S.) to IFR Group to finance drilling and development work based on the acquisition of interests in additional onshore oil and gas blocks in Mexico. The tranche B financing is intended to be negotiated and structured in a manner that allows IFR Group to draw on available funds to cover these costs.
Conditions of the transaction
The completion of the proposed transactions is subject to: (i) the completion of due diligence, where Simmons will conduct financial, geological and operational due diligence; and (ii) the execution of the definitive agreement. All parties will endeavour to complete the requisite due diligence and definitive agreement, such that drilling activities can commence at Tecolutla in the first quarter of 2021, in accordance with the terms of the tranche A letter of intent.
Simmons and IFR Group will enter into a services agreement, pursuant to which Simmons will provide drilling services from its fleet of fully equipped rigs as well as other services already operating in Mexico required for the work at Tecolutla.
Simmons previously provided drilling services to International Frontier's Mexican joint venture, Tonalli Energia, and has been providing onshore drilling services in Mexico since 2015. As a qualified operator under Mexican regulations, Tonalli Energia has a proven record and is focused on expanding its opportunities in the upstream and mid-stream oil and gas sector.
About International Frontier Resources Corp.
International Frontier Resources is a Canadian publicly traded company with a demonstrated record of advancing oil and gas projects. Through its Mexican subsidiary, Petro Frontera SAPI de CV, and strategic joint ventures, it is advancing the development of petroleum and natural gas assets in Mexico.
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