Avante Colombia currently has a 50% participation interest and is the operator of the Rio de Oro and Puerto Barco exploration and production contracts with Ecopetrol in the Catatumbo area in eastern Colombia. Independent engineering reports on behalf of Avante have estimated a total resource potential of approximately 1.4 MMbbls.
Under the terms of the letter of intent, La Cortez and Avante will also enter into a joint venture to develop another exploration opportunity in Colombia.
La Cortez will acquire 100% of the outstanding stock of Avante Colombia in exchange for 10,285,819 (restricted) common shares of La Cortez, equivalent to 30% of the total shares of La Cortez outstanding after the acquisition. In addition, Avante will invest a minimum of $2.5m and a maximum of $5m in the common equity of La Cortez at a price of $1.75 per unit, with each unit consisting of one share of La Cortez common stock and a three-year warrant to purchase one share of (restricted) common stock exercisable at $3 per share. Avante will have the right to nominate one member to the board of directors of La Cortez.
The transaction is subject to legal and financial due diligence by both Avante and La Cortez. The parties have agreed to use their efforts to sign a definitive purchase agreement by December 18, 2009. If a formal agreement is not signed by the end of the year, the LOI will expire unless otherwise extended by mutual agreement of the parties. The LOI contains, and the definitive agreement will contain, customary exclusivity provisions and other conditions to closing. It is the intent of the parties to close on or before the end of the year.
