GOS PRE AGREEMENT SIGNED ON JULIA CREEK WITH XTRACT ENERGY PLC

 

Global Oil Shale is pleased to announce that negotiations between Global Oil Shale Group Limited (“GOS”) and Xtract with regard to Xtract’s oil shale tenements at Julia Creek in Queensland, Australia have advanced with the restructuring of the transaction resulting in alignment of both companies’ strategic objectives and the signing of a further non-binding heads of agreement.

The Julia Creek tenements cover an area of 709 square kilometres and contain JORC defined Indicated and Inferred Resources of 2.18 billion barrels of shale oil at an average grade of 61 litres per tonne at zero moisture (LTOM).

 

Highlights

  • Strategic alignment of Xtract’s interest in Julia Creek with GOS as an investor and developer for the Julia Creek deposit.
  • Xtract to assign its oil shale rights in Julia Creek to GOS in exchange for
    • Strategic equity stake in GOS of 7.5 million shares, expected to represent 7.5% of total shares in GOS on its planned IPO;
    • Long term interest in the Julia Creek project through a 1% net smelter royalty; and
    • An initial cash payment of AUD$ 50,000 payable on signing the Share Purchase Agreement and prior to GOS’ commitment to a full work program on Julia Creek.
  • GOS shall carry out a detailed work program for Julia Creek of minimum AUD$ 3 million with key milestone deliverables :
    • Mining plan and resource testing;
    • Pre feasibility plan for choice of processing approach for Julia Creek;
    • Bankable feasibility plan and small scale pilot testing of production.
  • GOS to fund all of Julia Creek ongoing holding and development costs
  • Xtract to gain a single project risk mitigating exposure to GOS’ multi oil shale project development portfolio and access to their leading knowhow in the sector
  • Xtract to focus on its core strategy of seeking additional conventional oil and gas opportunities.

 

GOS is an independent energy company exclusively focussed on production of oil and other valuable products from oil shale resources.  GOS has a strong management team of more than 20 oil shale specialists based in the United Kingdom, Estonia, Australia and Morocco. GOS has current projects in development in key oil shale jurisdictions globally including Jordan, Morocco, Australia and Israel. Additionally they have proprietary knowhow for low emission development of oil shale, which is coupled with partnerships with some of the leading engineering and mining technology companies in the oil shale market.

 

Heads of Agreement

The heads of agreement sets out the principal terms and conditions on and subject to which GOS is willing to acquire 100% of all issued and outstanding shares in Xtract Oil Limited (“XOL”) from Xtract, subject to the agreement and signing by the parties of a detailed legally binding Share Purchase Agreement (“SPA”).  Xtract’s rights over the Julia Creek tenements are held in XOL and under an existing agreement between Xtract Energy Plc and Intermin Resources Ltd. As part of this transaction Xtract will assign to XOL all of its rights in relation to the Julia Creek shale assets.

Consideration: The consideration payable to Xtract is intended to comprise three elements;

Royalty:A 1% net smelter royalty (“NSR”) on revenue derived by GOS from oil shale produced from the Julia Creek tenements (the “Royalty”), with an NSR agreement to be separately negotiated.

Royalty Buyback: If GOS elects to buy back all or part of the Royalty in accordance with the provisions set out below, Xtract may elect to receive cash or the equivalent value of shares in GOS.0 – 1 years: Up to and including the first anniversary of signing the SPA, GOS may exercise an option to buy back all or part of the Royalty from Xtract at a price of AUD$ 100,000  per 0.1% purchased (i.e., purchasing the entire Royalty would cost AUD$ 1 million.1 – 2 years: After the first anniversary and up to and including the second anniversary of the signing the SPA, GOS may exercise an option to buy back all or part of the Royalty (to the extent not already bought back) from Xtract at a price of AUD$ 300,000  per 0.1% purchased.2 – 4 years: After the second anniversary and up to and including the fourth anniversary of signing the SPA, GOS may exercise an option to buy back all or part of the Royalty (to the extent not already bought back) from the Xtract at a price of AUD$ 500,000 per 0.1% purchased.

Shares: Xtract shall be issued such number of shares in GOS on IPO as would give Xtract a 7.5% interest in GOS, subject to a floor of 6 million shares, which assumes 80 million or fewer GOS shares in issue and a ceiling of 7.5 million shares, which assumes 100 million or more GOS shares in issue.

Cash: AUD$ 50,000 payable on signing the SPA.

 

On signing of the SPA, GOS shall carry out a minimum AUD$3 million work program to be completed on or prior to the fourth anniversary of signing the SPA.  The work programme deliverables are :

  • Mining plan and resource testing;
  • Pre feasibility plan for choice of processing approach for Julia Creek;
  • Bankable feasibility plan and small scale pilot testing of production.

 

If GOS abandons the work program on or after the fourth anniversary of signing the SPA, Xtract shall have the option to repurchase the XOL shares from GOS in consideration for repayment of GOS’s back costs incurred in respect of Julia Creek.

 

Xtract and GOS anticipate that negotiations leading to detailed legally binding SPA and the associated agreements will be completed within one month and binding exclusivity arrangements are in place for that period.

 

Petri Karjalainen, Executive Chairman of Global Oil Shale Group Limited commented:

 

“Global Oil Shale is pleased to have concluded this agreement and looks forward to Xtract Energy joining as a strategic equity partner in GOS as well as retaining its ongoing interest in the Julia Creek project through the long term royalty structure.

 

“We have evaluated extensively the Julia Creek opportunity over the past months and feel confident that our low emission Kerogex/Kerocon beneficiation approach, coupled with our partnerships with leading providers of proven oil shale processing technologies, provides a strong basis for a commercial development of the Julia Creek deposit, subject to local permitting.

 

“Furthermore Julia Creek will complement well our other oil shale developments in Jordan, Morocco and Israel with a key aim of using oil shale as a source for long term environmentally sustainable production of petroleum and other value add products.”

 

Commenting on this transaction Colin Bird, Executive Chairman of Xtract, stated

 

“The disposal of Julia Creek to GOS represents the first action to concentrate the focus of the Company. “

 

“GOS have an excellent management team and expertise in the oil shale business and the Xtract board consider therefore that GOS will extract maximum value from Julia Creek, whilst hedging its development with other oil shale projects within the GOS portfolio”

 

About Xtract Energy

 

Xtract identifies and invests in a portfolio of early stage oil and gas assets and business interests with significant growth potential. The Company aims to work closely with the associated management teams to achieve critical project milestones, to finance early stage asset and business development activity, and then to finance the asset development phase, or if appropriate to crystallise value for all shareholders at a suitable exit point. Xtract aims to achieve returns for our shareholders through access to the significant upside rewards associated with our investments.

 

For further information on Xtract please visit www.xtractenergy.co.uk

 

About Global Oil Shale Group Limited

 

GOS is active in developing market scale environmentally sustainable beneficiation and processing technologies for oil shale. GOS has has filed a patent application for its environmentally friendly KEROGEX kerogen beneficiation process which was developed at the GOS Development Centre in Kohtla Järve (Estonia). GOS is additionally developing it s KEROCON benefication for medium and low grade oil shale deposits for enabling commercial scale production on this type of oil shales.

 

GOS has a strategic Framework Agreement with TTU Limited (“TTU”) of St Petersburg (Russia), which is a company holding patents and critical knowhow for the UTT 3000 Modified Environmentally Friendly (MEF) thermal processing plant. Under the agreement GOS has access to TTU’s modified UTT 3000 MEF technology and associated licenses. The UTT 3000 MEF is based on the Galoter oil shale process, which has more than 60 years of continuous and proven operational history in production of oil and electricity from oil shale.

 

GOS has also an Oil Shale Alliance Agreement with Procom Consultants P/L (“Procom”), a Brisbane (Australia) based company focused on process engineering for the conventional and alternative fuels industries.  Procom is regarded as a leader in the field of oil shale processing. The core engineering team at Procom was responsible for the engineering and operations of the Stuart Oil Shale project in Queensland, Australia, which during its life produced approximately 1.5 million barrels of oil from oil shale.

 

GOS is supported by its main shareholders that include Baker Steel Capital Managers and ECAP Investments, both being resources focused investment management companies and has an intention of launching an IPO for Global Oil Shale on the London Stock Exchange or an other regulated stock exchange in 2013, following the results of its current development programs in Australia, Jordan, Morocco and Israel.

 

For more information contact:

 

Petri Karjalainen – Executive Chairman

Tel: +44 7811 200 885     Email:   pk@globaloilshale.com

 

Anton Eiguine – Investors Relations

Tel: +44 1534 88 6644      Email:    ase@globaloilshale.com