Primeline Secures Funds for LS36-1 Gas Field

Primeline Energy Holdings Inc. has confirmed the financing for its share of the costs of the LS36-1 gas field development.

The LS36-1 gas field is located in 84m of water in the East China Sea about 150km from the major city Wenzhou. The field was discovered by Primeline and has been developed by CNOOC, as operator, the Company and Primeline Petroleum Corp. The Development comprises a production platform with four production wells, a subsea pipeline and an onshore processing terminal.

Primeline and its affiliate company Primeline Petroleum Corp secured support from China Development Bank (CDB) for their share of the Development cost in May 2010 when a loan memorandum was signed.

In November 2012, CDB, Primeline and PPC entered into a revised Loan Memorandum which was approved in principle by CDB’s credit committee in January 2013. It was originally intended that the financing would be by way of a simple bilateral loan. However, in May 2014, CDB decided to syndicate the project finance loan.

CDB has now confirmed that it has completed syndication of the loan. The syndicate consists of CDB and China Export and Import Bank (EXIM) as joint lead arrangers and Shanghai Pudong Development Bank (SPDB) as participant and agent bank. The facility will be made available to Primeline and PPC on a joint borrower basis secured on their respective interests in the Development. The facility will be for a total amount of US$ 274 million (of which the Company’s share is US$ 205.5 million) and will be repayable over 9 years at an all-in interest rate of LIBOR+4.7%. The facility has been approved by the credit committees of all three banks. The first syndication meeting was held on 6th November when the syndication structure and loan details were confirmed.

The loan contract has been negotiated over the past few months and has now been substantially agreed. It is presently intended that the binding loan contract and related security documentation will be finalised, executed and implemented before the middle of December 2014 when a further announcement will be made.

The loan facility is sufficient to cover all of the obligations of Primeline and PPC with respect to the costs of the Development to date. The Development has been completed with trial production having started in July 2014. The trial production has been progressing well with most of the facilities now fully commissioned and production running smoothly. Confirmation of the production details is expected to be announced soon.

Victor Hwang, Chairman and President of Primeline commented: “We are very pleased to confirm the support of the two main policy banks in China to lead the long term finance of our project. This highlights that although LS36-1 development is a modest project by international standards, it is strategically important to the development of gas reserves and infrastructure in China. We are also pleased with the participation of Shanghai Pudong Development Bank which will provide commercial bank operational support. The development of a production hub in the southern East China Sea basin and Primeline’s relationship with these important Chinese financial institutions provides us with a launching pad for the next stage of our rolling development led exploration programme.”

Press Release