Mediterranean Oil and Gas (MOG), has entered into a conditional farm-out agreement with Genel Energy over MOG's wholly-owned Area 4 asset, Offshore Malta.
Under the agreement, Genel will acquire 75% of MOG's interest, which covers blocks 4, 5, 6 and 7, for $10m cash on completion of the transaction. The consideration will also include 100% carry on the first and second exploration wells (up to $30m gross expenditure on the second).
If the costs on the second well exceed $30m then, at MOG's option, Genel will provide a financing arrangement to fund MOG's 25% share of any additional expenditure, at an interest rate equivalent to three month LIBOR (inter-bank lending rate) plus four percentage points.
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MOG's wholly-owned subsidiary Phoenicia Energy will remain the operator until the completion of the first well, when Genel can then elect to become the operator.
MOG has also signed an area of mutual interest agreement with Genel to co-operate in acquiring exploration and production assets in the offshore basins of Libya, Tunisia and Malta for a minimum term of three years.
The equity in any asset acquired within the agreement will be shared on the basis of 20% to MOG and 80% to Genel.
Dr Bill Higgs, Chief Executive of MOG, said: "I am very pleased that we have been able to secure such a high quality and substantial partner as Genel to progress the exploration of Area 4 Offshore Malta with the drill bit. Genel has an excellent track record in international oil and gas exploration and development. We are excited about the opportunities within the frontier acreage of Area 4 and we are moving ahead with the planning of the first exploration well.
"We are also pleased to have the opportunity to pursue other exploration and production prospects offshore Malta, Libya and Tunisia jointly with Genel. The geological similarities to Area 4, together with our combined technical expertise, give plenty of scope to unlock additional value in the region."
MOG's share price rose 14.13% to 13.12p, while Genel's share price climbed 1.22% to 703p by 09:25.
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