Adira Energy Settles Disputes. Asks for More Time for Drilling Offshore Israel
Adira Energy Ltd. has entered into a settlement and release agreement with Modi’in Energy LP (“Modi’in”) and Brownstone Energy Inc. (“Brownstone”) to resolve the Consortium’s previously disclosed disputes over their respective funding obligations and related suspension of operations on the Gabriella License.
Pursuant to the Agreement, the Consortium members agree to waive and release each other from any claims and demands they may have with respect to the Gabriella License. The Agreement further provides that the Consortium members will fund their proportionate share of costs associated with the Gabriella License incurred in connection with the attempted drilling of the first well. Adira’s net share of the costs total approximately US$3.2 million and is payable in stages over a 90 day period from the Effective Date (as defined below).
Jeffrey E. Walter, Chief Executive Officer of Adira commented, “Adira and its partners in the Gabriella License have faced many operational and financial challenges over the past half year. Despite confirming contingent resources on the License and having a drilling rig on site, the Consortium was unable to execute the drill program. Appreciating the need for co-operation and mutual agreement in order to maintain and extend the tenure of the License, as well as to secure financing for the continued operations on the License, the Consortium has worked diligently to complete the co-operation agreements and submit the request for License extension to the Ministry of Energy and Water. Adira has the intention and aspiration to develop the Gabriella License and is currently assessing finance options to maintain its interest in the License.”
The Agreement also provides the Consortium members with tag-along rights for a period of one year from the Effective Date (as defined below) to participate in any farm out of their participating interests in the Gabriella License consummated by the other members. In addition, Adira agrees to relinquish its 15% buy back option and management fee, and reduce its overriding royalty interest to 2.625%.
In the event that Adira does not pay its share of abovementioned costs, at Modi’in’s request, Adira may withdraw from the Joint Operating Agreement and assign its participating interest in the Gabriella License to the remaining Consortium members, and will relinquish its remaining royalties.
The Agreement is subject to Modi’in unitholder approval, which is expected to be received within 10 days.
The Agreement replaces the Letter Agreement, dated December 20, 2012 and the Memorandum of Understanding, dated June 12, 2012, signed by the Consortium members.
Gabriella and Yitzhak License Extension Request
Adira further announces that on June 30, 2013, it applied to the Ministry of Energy and Water of the State of Israel(the “Ministry“) for an extension of the dates for the execution of a drilling contract on the Gabriella License toFebruary 28, 2014, and for the spud of the first well to December 31, 2014.
Adira also applied to the Ministry for an extension of the dates for the execution of a drilling contract on the Yitzhak License, offshore Israel, to September 30, 2014, and for the spud of the first well to June 30, 2015.