Oil exploration partnership Modiin Energy LP (TASE:MDIN.L) today announced that it has acquired 70% of the Gabriella offshore license from Canada's Adira Energy Corporation (XETRA: AORLB8; Bulletin Board: AMGOF) subsidiary Adira Energy Israel Ltd.
Modiin Energy will finance the exploration costs for its own 70% stake, plus an additional 15%, half of Adira's remaining stake. The parties authorized a work plan with an $8 million budget. Modiin Energy will fund $5.6 million, which is its 70% stake, and will finance up to $1.2 million toward Adira's costs.
The announcement comes two days after the Tel Aviv Stock Exchange (TASE) management took the company's shares off the watch list, where it had been since January 2008. Modiin Energy, controlled by Yitzhak Sultan and Nochi Dankner's IDB Holding Corp. Ltd. (TASE:IDBH), raised NIS 20 million in a rights issue last week, which raised enough shareholders' equity to remove the company from the watch list.
Adira Energy bought the three-year license in July 2009. The 390-square kilometer license is located 10 kilometer offshore between Netanya and Ashdod. The water depth is up to 650 meters. The terms of the license state that the license holder must carry out a general work plan for the site, including a 3D seismic survey and begin drilling a well up to a depth of 5,000 meters by mid-January 2012.
Although it premature to discuss production from the license, Modiin Energy and Adira Energy agreed that, if oil, gas, or other substances of value are produced from the well in the future, Modiin will pay Adira royalties of 2.25% of its share of revenue from their sale until Modiin recoups the cost of exploration and 5.25% of its total share of revenue from sales after its costs are repaid.
Modiin's share fell 9.6% to NIS 0.032 in morning trading today, giving a market cap of about NIS 200 million.
Published by Globes [online], Israel business news - www.globes-online.com - on January 26, 2010
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