The amendment of the farmout agreement provides that Lion will reduce its interest in Block 10BB to 10% (originally 20%) and will not retain any interest in Block 10A (originally 25%).
As consideration, Africa Oil has agreed to pay Lion $2.5m in cash and to issue to Lion 2.5 million common shares.
The company has also agreed to the elimination of future expenditure promotes in Block 10BB and on Lion’s projects in Puntland (Somalia) and the release of $4m in escrowed funds.
The amendments to the farmout agreement are subject to the closing of a definitive farmout agreement between Tullow Oil and Africa Oil whereby Tullow will acquire a 50% interest in, and operatorship of, three of Africa Oil’s east African exploration blocks, comprised of two exploration blocks in Kenya and one exploration block in Ethiopia.
Under the terms of the Tullow farmout agreement, Tullow will acquire a 50% interest in, and operatorship of, 10BB and 10A blocks in Kenya.
Africa Oil is currently acquiring seismic in block 10BB, and drilling of the first exploration well on this block is expected during the first half of 2011.
