Rex International unit terminates existing lease for two rigs with Loyz Energy

FRAM Exploration ASA, in which oil exploration and production company Rex International Holding has a 30.29 per cent interest, has terminated its existing five-year lease for two rigs with another Singapore-listed oil company Loyz Energy.

The termination fee will be US$13.8 million to be paid to FRAM, Rex International said in a statement released on Tuesday after the market closed.

The consideration will be satisfied by a US$2.5 million payment in cash and US$11.3 million in 136.5 million new shares in Loyz Energy, with a commitment to a nine-month lock-up period for these new shares, it said.

The issuance of 136.5 million new shares in Loyz Energy has been approved at the company's extraordinary general meeting held on Monday, it added.

According to Rex International, FRAM had in January 2015 raised 28.6 million kroner (S$4.9 million) through a fund-raising round, after an investor did not honour certain obligations and commitments from its subscription to FRAM's previous fund-raising exercise in March 2014.

The amount raised in the January 2015 fund-raising round and the consideration from the termination of the leases for the two rigs will be used for working capital and well work-overs to further confirm the validity of the newly identified concessions in Whitewater, Colorado and for conducting a seismic survey in Williston Basin, North Dakota.

In the statement, Rex International Holding CEO Mans Lidgren said that the company was pleased to note that FRAM had managed to resolve its short-term financial issues with Loyz Energy through this deal. "With the cash consideration, FRAM will be in a better position to fulfil its ongoing obligations."

Mr Lidgren also noted that FRAM has requested to use Rex's liquid hydrocarbon indicator Rex Virtual Drilling to analyse new seismic data that it will be acquiring for its assets in North Dakota and Colorado to further de-risk the projects.