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Fram Exploration Closes Agreement to Fund US Drilling


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Fram Exploration Closes Agreement to Fund US Drilling

Business

Category: Energy

This milestone participation & exploration agreement (PEA) deal was
signed between Fram Exploration ASA, Loyz Oil Pte Ltd (Loyz) and Rex Oil &
Gas Limited (Rex), a major technology partner of Loyz Energy. The PEA paves the
way for taking out the production potential in the discoveries on Fram’s leases
located in the resource-rich plains of Colorado and North Dakota, US. The leases
cover almost 60,000 acres of land in the two US states and include the single
largest unitized lease in Colorado.

Under the terms of the participation agreement, Loyz and Rex will fund USD 40
million, distributed with USD 28 million in the first year and USD 12 million in
the second year of the drilling program. In return for their participation, Loyz
and Rex will combined receive 40% of the net revenue generated from the wells
drilled under the program. The net revenue interest is convertible into a 26%
farm-in in Fram’s assets in Colorado and North Dakota.

The net revenue is defined as the revenue from production from the wells
drilled, after deducting royalties, state, local ad valorem and production
taxes, oil & gas (O&G) quality adjustments, transportation expenses and
direct costs associated with operating and administering the leases under the
agreement.

The Parties have secured two drilling rigs that will drill back to back over
a 24 months period, commencing in Q1 2013. The agreement also gives access to
Rex’ proprietary technology related to further exploration activity in North
Dakota. Loyz shall deliver drilling and completion services under a turnkey
drilling agreement.

“We are pleased to have arranged substantial funding for the 40 wells we plan
to drill annually on our U.S. leases,” commented Bernt Østhus, Chairman of the
Board of Fram. “This deal will enable Fram to harvest from the successful
exploration work that has been performed over the last three years. We look
forward to working with the professionals at Rex and Loyz in successfully
executing this joint venture.”

Commenting on the significance of the agreement, Mr Adrian Lee, the Executive
Director of Loyz Energy, said: “This deal marks a major milestone for Loyz as we
enter our next phase of expansion – it is the first venture where we will see
revenues come in right away. Not only will we enjoy immediate cash flows and
revenue from the drilling contract, but we expect to derive significant revenue
and cash flows from the producing wells. On top of this, Loyz has the option to
convert its revenue interest into a 13% working interest of Fram’s entire lease
area in Colorado and North Dakota.”

Loyz Oil Pte Ltd. Is based in Singapore and Rex Oil & Gas is based in the
British Virgin Islands.

Source: Fram Exploration ASA

Published: June 30, 2022