Investment Update
3 July
2008
AIM: XTR
XTRACT ENERGY PLC
("Xtract" or the "Company")
PROJECT UPDATE - MEO Australia Ltd
Xtract refers shareholders to the following press release announced
in Australia by MEO Australia Ltd ("MEO").
Following the placing referred to in MEO's announcement, Xtract holds
approximately 13.9% of the issued capital of MEO.
"ASX AND MEDIA RELEASE
MEO AUSTRALIA ANNOUNCES MAJOR STRATEGIC ALLIANCE
Key points:
* Strategic alliance formed with Resource Development
International Ltd ("RDI") - an entity
controlled by one of Australia's wealtheiest men,
Professor Cliver Palmer
* RDI has extensive iron ore, steel, nickel and energy
interests and is planning to raise A$5 billion
and list on the Hong Kong and Australian Stock Exchanges
later in 2008
* Funding secured for forthcoming Zeus-1 exploration well
targeting multi-TCF potential gas
resources in WA-361-P leaving MEO with a 25% interest
* Majority funding for up to 9 wells (including Zeus-1) in
MEO's three offshore West Australian
Permits in the success case
* Staged funding program for appraisal drilling in NT/P68 -
up to 4 intital wells
* 100% funding for NT/P68 appraisal to achieve Third Party
Reserve certification
* MEO fully funded through to commercial production of
upstream facilities and its approved Gas-to-
Liquids projects on Tassie Shoal while retaining a 20%
interest
* Placement of 21.391m shares at $0.55 to Mineralogy Pty Ltd
- Prof Palmer's private company -
raising $11.8M cash to MEO before costs.
MELBOURNE, AUSTRALIA (July 3, 2008) - MEO Australia is pleased to
announce that it has entered into a major strategic alliance with
Resource Development International Ltd ("RDI"), an unlisted public
entity associated with and Chaired by Brisbane based billionaire -
Professor Clive Palmer. RDI will contain substantial iron ore (up to
10 billion tons), steel, nickel and energy interests. RDI is planning
to raise A$5 billion via an initial public offering (IPO) of shares
later this year. RDI will be dual listed on the Hong Kong and
Australian Stock Exchanges. Leading investment banks have been
appointed to manage the IPO.
This strategic alliance will see a staged funding approach for each
of MEO's project areas subject to various conditions precedent
including a successful IPO. As part of MEO's 15% placement capacity,
the Company has placed 21.391m shares to Mineralogy Pty Ltd at $0.55
to raise $11.8m before costs to fund ongoing geotechnical activity in
NT/P68. MEO has further granted 14.498m options to subscribe for
ordinary shares in MEO at an exercise price of $0.65 on or before 30
September 2008.
RDI has undertaken to fund the vast majority of MEO's share of costs
in up to 9 wells (success case) in the company's three offshore West
Australian permits (WA-359-P, WA-360-P and WA-361-P) to earn a 35%
interest in each permit. MEO's interest in these permits will reduce
to 25% in the event the option to drill in each is exercised by RDI.
RDI has initially committed to fund 80% (well cost capped to
US$31.25m, and thereafter 52.5%) of the forthcoming Zeus-1 well
targeting multi-TCF potential gas resources in WA-361-P to earn a 35%
interest. MEO will fund 10% of the well and retain a 25% interest.
Existing JV partners - Cue Energy (20%, ASX: CUE) and Gascorp (20%,
unlisted) have the option to fund up to a combined 10% of the cost of
this well or allow MEO to increase its interest in the permit by up
to 10% by funding up to an additional 10% of the well cost. In the
event of drilling success at Zeus-1, RDI will fully fund MEO's share
of two additional appraisal wells. In the event Zeus-1 is
unsuccessful, RDI will fund MEO's share of one additional exploration
well subject to a successful listing of RDI.
In its Timor Sea projects, and subject to Petrofac Energy
Developments Oceania Ltd's pre-emptive rights, the agreement with RDI
sees MEO's share of funding for all appraisal drilling and all
project capital costs (upstream and downstream), fully carried
through to commercial production on each of its proposed Tassie Shoal
Gas-to-Liquids (GTL) projects, while retaining a 20% interest. This
involves RDI funding a staged appraisal drilling program of initially
two wells (Heron-3 and Blackwood-2) to earn a 25% interest and two
additional wells to earn a further 25% interest. Thereafter, RDI has
undertaken to secure funding to meet all of MEO's costs in relation
to any further appraisal activities required for certification of gas
reserves and all capital costs required to bring each of its GTL
projects into commercial production.
Implications
MEO has secured a substantial strategic funding partner in RDI with
aligned interests and outstanding connections to major Chinese
business, consumer and resources interests. The agreement executed
with RDI represents a watershed event in the history of the company.
It has the potential to see the company fully funded with a 20%
carried equity interest through to commercial production on each of
its approved GTL projects in the Timor Sea subject to securing
adequate gas resources from NT/P68 or 3rd party sources.
The agreement also meets the immediate funding requirements to commit
irrevocably to drilling the Zeus-1 well during October 2008. Zeus-1
is targeting multi-TCF potential gas resources in WA-361-P which is
immediately adjacent to the established North West Shelf Gas Project
that supplies gas to the onshore LNG producing facilities. The
agreement also provides for further significant funding for up to
eight additional wells, across the three WA offshore permits, which
meets the majority of MEO's share of appraisal drilling costs.
In relation to the Company's present assets, this agreement protects
MEO shareholders from any significant dilution in share capital.
C.R. Hart
Managing Director
Details of the transaction
The strategic alliance comprises a number of significant components:
Direct shareholding in MEO
* Placement of 21.391m shares [approx 5% of issued capital]
at $0.55 to Mineralogy Pty Ltd raising
$11.765m before costs.
* Granting of 14.498m options [approx 3.4% of issued capital]
at an exercise price of $0.65 and expiry date of
30 September 2008. Upon exercise, the company will
receive further cash proceeds of $9.434m.
* A further 2m options have been granted with an exercise
price of $0.55 and expiry date of 30 June 2009.
Exercising these options will generate cash proceeds of
$1.1m.
Commitment to Farm-in to WA-361-P to earn 35% interest
* RDI earning a 35% interest (MEO 25%) to fund 80% of the
proposed Zeus-1 well to a cap of US$31.25m.
RDI funding 52.5% of well costs in excess of this cap.
MEO to fund 10% of the well cost to cap of
US$31.25m and 37.5% of well cost above this level
(assuming Cue and Gascorp fund 10%).
* RDI to fund 100% of MEO's share of two subsequent appraisal
wells in the event that Zeus-1 discovers
hydrocarbons.
* RDI to fund 100% of MEO's share of one additional well in
the event that Zeus-1 fails to discover
hydrocarbons, subject to the listing of RDI.
* Cue and Gascorp each have an option to pay for 5% of the
Zeus-1 well to maintain their respective 20%
interests. Any interest not taken up by Cue and/or
Gascorp reverts to MEO and increases its funding
share by that quantum.
Option to farm-in to WA-359-P and/or WA-360-P to earn 35% interest
* MEO has an option to make an irrevocable commitment by 1
January 2009 to drill a well in either or both
permits or withdraw from either or both the permits.
* MEO has granted RDI an option until December 1, 2008 to
earn a 35% interest in either or both permits
(MEO 25%) by funding 80% of the cost of one exploration
well.
* RDI to fund 100% of MEO's share of two subsequent appraisal
wells in the event that first well discovers
hydrocarbons.
Option to farm-in to NT/P68 and the Tassie Shoal GTL projects (LNG
and methanol) to earn up to 70% interest in 3 stages
* This option is subject to Petrofac Energy Developments
Oceania Ltd's pre-emptive rights to match the offer
by RDI within 30 days.
* Option to commit to funding 100% of MEO's share of two
appraisal wells (Heron-3 and Blackwood-2) to
earn a 25% interest. Election to participate the earlier
of 14 days after the close of the RDI IPO or 31
December 2008.
* Option to earn an additional 25% interest by committing to
funding 100% of MEO's share of two further
appraisal wells.
* Option to earn a final 20% interest by meeting MEO's share
of costs in relation to:
o all further appraisal costs to achieve
adequate third party gas reserve certification;
o all capital costs pertaining to bringing any
NT/P68 gas resource into commercial production; and
o 100% of MEO's share of capital costs to bring
each GTL project into commercial production."
Further information on MEO can be found at www.meoaustralia.com.au.
Enquiries please contact:
Xtract Energy plc Andy Morrison, CEO +44 (0) 20 7079
1798
Smith & Williamson Corporate David Jones +44 (0) 20 7131
Finance Limited Azhic Basirov 4000
Scott Harris Stephen Scott +44 (0) 20 7653
Annabel Michie 0030
For further Information on Xtract please visit www.xtractenergy.co.uk
About Xtract Energy Plc
Xtract identifies and invests in a diversified portfolio of early
stage energy sector technologies and businesses with very significant
growth potential. We aim to work closely with the associated
management teams to achieve critical project milestones, to finance
later development stages and to build and crystallise value for all
shareholders and partners.
A short description of the principal assets of Xtract is set out
below. These assets are either held directly or through wholly owned
subsidiaries of the Company.
MEO Australia
MEO is focused on developing gas-to-liquids ("GTL") projects in the
Timor Sea Australia, in an area of shallow water known as Tassie
Shoal. It has secured Commonwealth Government environmental approvals
for two large scale (1.8 Mtpa) methanol plants (50 per cent.
interest) and a 3 Mtpa LNG plant (100 per cent. interest) which are
adjacent to the Evans Shoal gas field.
Elko Energy
Elko is an oil & gas exploration company which has an interest in a
5,370km2 exploration and production licence in the Danish North Sea
and an investment in Dragon Energy Inc, a private Canadian company,
with a development project in Gansu Province, China.
Wasabi Energy
Wasabi is a diversified investor in renewable energy and low
greenhouse emission technologies, with interests in geothermal
waste/heat, uranium exploration in Australia's Northern Territory and
biodiesel investments in Victoria.
Central Asian Interests
Xtract's Central Asian interests include a production sharing
agreement with Kyrgyzneftegaz to instigate a water injection project
on the Beshkent- Togap oil field. Xtract also holds interests in
several exploration licences in the Tash Kumyr area and in the
Toktogul exploration licence.
Oil Shale
Xtract has oil shale and related petroleum product exploration rights
over mining tenements in the Julia Creek area of Queensland and was
granted an exploration permit which gives rights to explore for oil
shale in an area in the South of New Zealand. It is investigating the
commercial production of hydrocarbons (crude oil) from oil shale.
Xtract is also available for trading on the open market segment of
the Frankfurt Stock Exchange (ticker R9X.FSE).
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