Rex inks options agreements to fund Norway exploration

OILFIELD services firm Rex International has signed options agreements to partially fund its 90 per cent-owned subsidiary Lime Petroleum's participation in the exploration drilling of two wells in Norway.

Under the agreements, Switzerland-based oil and gas exploration company Trace Atlantic Oil has options to receive shares of proceeds of potential dividends from Lime, Catalist-listed Rex said in a bourse filing on Wednesday.

These dividends will be due to Rex's wholly-owned subsidiary Rex International Investment (RII), which holds the 90 per cent stake in Lime, if the drilling activities of the Apollonia prospect in licences PL263D/E and the Fat Canyon prospect in licences PL937/B are successful.

Should the wells result in oil discoveries, Trace stands to receive 6.75 per cent of dividends due to RII for the Apollonia well and 12 per cent for the Fat Canyon well from any successful sales of the licences.

Option fees totalling US$1.1 million, comprising US$550,000 for each well, will be used to fund part of Lime's participation.

The option fees were arrived after taking into consideration Lime's unaudited net asset value/net tangible asset value of US$13.74 million as at June 30, 2020, and the potential success in the exploration drilling of the Apollonia and Fat Canyon prospects, Rex said.

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The group's interests in Lime will remain unchanged if Trace exercises all call options.

Dan Brostrom, Rex executive chairman, said: "This is an innovative way to 'farm out' our assets at a premium valuation without diluting our interest in our 90 per cent subsidiary."

The options agreements allow the Rex group to reduce its financial exposure in funding Lime's participation in the two exploration wells, especially in the current challenging market environment, he added.

Shares of Rex were trading at 13.8 Singapore cents as at 9.19am on Wednesday, down 0.4 cent or 2.8 per cent.