PERTH (miningweekly.com) – ASX-listed Eden Energy on Thursday announced that it had agreed to divest of its UK subsidiary to UK Onshore Gas (UKOG).
Under the terms of the agreement, UKOG would pay Eden Energy £1 in cash for the assets, with the two parties also entering into an overriding royalty agreement, which has been capped at £35-million.
The royalty would be calculated monthly as soon as petroleum substances were first sold from the UK holdings.
UKOG has the right to buy Eden out of the royalty agreement for £17.5-million, less 50% of any royalty already paid, provided that such a buy-out option was exercised within the first five years of the date of agreement.
Furthermore, UKOG would also acquire Eden’s debts and liabilities associated with its UK assets, which included a shareholding in a number of petroleum and exploration development licences.
Eden said on Thursday that with the sale of its UK assets, the company would have no further financial commitments to the project, but could still share in the potential upside from hydrocarbon sales.
However, the company noted that there was no guarantee that any royalty payment would be forthcoming from UKOG, as the payment was dependent on a petroleum substance being mined or extracted from the tenement areas.
The transaction would not require shareholder approval from Eden shareholders.