LHD operational update.
http://www.asx.com.au/asxpdf/20120628/pdf/4273h45q8mq1r1.pdf
An expansion on all the subjects below is available at the link.
The board of Lochard is pleased to update shareholders on progress on the following matters
• Determination of the final payment in respect of the sale of the drilling fluid business
• Settlement of the outstanding litigation with Senergy
• Production at Athena and short term funding arrangements
• Progress with farm-outs for Thunderball and Moby assets
• Change of auditor
Important points.
Lochard is pleased to announce the deferred element of the purchase consideration for the sale of the drilling fluids business has been agreed at A$13.9 million.
The board of Lochard is pleased to announce that after negotiation, a full and final agreement has been reached between all the relevant parties for Zeus to pay US$9 million in damages including costs. This amount will be paid in monthly installments commencing at the end of August 2012 and ending in February 2013.
First oil started flowing at Athena in late May 2012 with Ithaca reporting production flow rates of 22,000 bopd (2,200 bopd net to Lochard). On 21 June Ithaca revised its estimate in light of production start up issues to a current rate of 12,000 bopd (1,200bopd net to Lochard). Based on the latest information available to them your directors do not believe production rates will increase from the current level before the end of the year.
To fund part of Lochard’s participation in the Athena field Lochard’s previous management borrowed US$14 million from Gemini Oil & Gas Fund II, L.P. (“Gemini”). Under the terms of the Gemini loan agreement Lochard is required to repay Gemini US$28 million plus a 5% residual royalty on gross production (“Gemini Royalty”).
The first US$14 million is repayable at the rate of 50 per cent of production revenue, after which the repayment rate falls to 20 per cent of production revenues until $28 million is repaid, after which the Gemini Royalty is due.
Based on current production levels and oil prices your board expects to have repaid the first US$14 million of the Gemini loan by February 2013 and the second $14 million by November 2014.
Now Athena has commenced production the board’s focus is on the Thunderball and Moby discoveries. The Company has a commitment to drill Thunderball by the end of February 2013. Lochard has previously announced the commencement of a farm out process for both its Thunderball and Moby discoveries.
The Canadian Imperial Bank of Commerce (“CIBC”) has been retained to assist in finding and concluding farm-out arrangements for both the Thunderball and Moby discoveries. A data room is being prepared and we are pleased to report early interest from a number of parties.