GeoGlobal Resources Inc. has assigned to Gujarat State Petroleum Corporation (GSPC) all its rights to receive a 30% participating interest in two exploration blocks awarded by the Arab Republic of Egypt in exchange for an option exercisable on or before April 30, 2008 to reacquire all or a portion of those rights.
GeoGlobal’s rights in the two exploration blocks arise out of a July 2006 joint study and bid agreement with GSPC and Alkor Petroo Limited to participate in the Egyptian government’s bid solicitation process related to six exploration blocks. The bid partners subsequently bid and won the right to explore two of the blocks, GANOPE Block 8 onshore (also known as South Diyur) and E-GAS Block 6 offshore (also known as N. Hap’y).
GeoGlobal previously provided GSPC with non-refundable bank guarantees totaling US$1.17 million, approximately 2% of GeoGlobal’s share of the joint bidders’ total financial commitments for conducting the first exploration phase on the two exploration blocks.
In the event GeoGlobal exercises the option, it will be required to pay to GSPC its pro rata share of all costs and expenses from the effective date of the option agreement (December 31, 2007). GeoGlobal will also have to provide to GSPC bank guarantees equal to the remaining 98%, based upon GeoGlobal’s share of the rights it elects to reacquire, of the total financial commitment for conducting the first exploration phase on the two exploration blocks. If GeoGlobal elected to participate to the full 30%, these additional bank guarantees would amount to approximately US$56.4 million. In addition to the non-refundable US$1.17 million of bank guarantees, GeoGlobal’s oil and gas assets included approximately US$2.4 million relating to its interests in the two exploration blocks which will be carried forward as an investment in the option pending GeoGlobal’s determination whether it will exercise any portion of the option.
“We believe that the assignment and option strategy is a prudent method of retaining the potential upside of these interesting and prospective exploration blocks,” said Jean P. Roy, President & CEO, GeoGlobal Resources Inc. “We intend to continue to make a further internal evaluation of the blocks in an effort to arrive at a final decision regarding our further participation.”