COPL Signs a SPA for Block LB-13 Offshore Liberia

Source: www.gulfoilandgas.com 5/18/2011, Location: Africa

Canadian Overseas Petroleum Limited (COPL) has signed a Sale and Purchase Agreement (SPA) to acquire a 100% interest in Block LB-13 offshore Liberia from Peppercoast Petroleum plc (Peppercoast) for a total sum of US$85,000,000 payable in cash and common shares of COPL.

The transaction is expected to close on or about June 30, 2011 assuming certain conditions can be satisfied including obtaining the consent of The National Oil Company of Liberia (NOCAL).

The purchase price will be satisfied, subject to approval by the TSX Venture Exchange, as to a minimum of US$45,000,000 and a maximum of US$50,000,000 in cash, and the remainder in common shares of COPL which will be issued directly to the Peppercoast shareholders and priced at US$0.5473 per share (being the five day volume weighted average price per common share in US Dollars on the TSX Venture Exchange in the five business days prior to today’s date, and based on the noon exchange rate for the Canadian dollar against the US Dollar as quoted by the Bank of Canada).

If the minimum amount of cash is paid on closing, COPL will be required to issue 71,428,908 common shares representing approximately 25% of the number of COPL common shares currently outstanding. If the maximum amount of cash is paid on closing, COPL will be required to issue 62,500,295 common shares representing approximately 22% of the number of COPL common shares currently outstanding.

Block LB-13 covers an area of approximately 2,400 square kilometres and is adjacent to blocks LB-14 and LB-12 held by a super major oil company. COPL will also acquire 2,200 square kilometres of 3D seismic that was shot for Peppercoast in the first quarter of 2010.

The Production Sharing Contract (PSC) for Block LB-13 is an 8-year exploration license that commenced in May 2007 and is divided into 3 phases of 4 years, 2 years and 2 years, respectively. The second and third phases of the PSC require the drilling of a well in each phase. The second phase of the PSC is to commence on May 23, 2011.

In addition to the agreed purchase price, COPL has loaned US$15 million on a secured basis to Peppercoast in order for Peppercoast to satisfy an account payable to TGS-Nopec Geophysical. The loan funds pay for the acquisition and processing of the 3D seismic survey referred to above and should also satisfy Peppercoast’s work obligations under the PSC’s first phase.

Arthur Millholland, CEO of COPL stated, “COPL’s Board of Directors has adopted a strategy of expanding the geographic opportunities available to the corporation. The nature of the geology and geophysical signature of the drilling prospects identified to date on LB-13 is very familiar to the technical staff of COPL.”

Mr. Millholland added that “The drilling targets we have identified on LB-13 are Cretaceous turbidite sand stratigraphic traps analogous to the Paleocene drilling targets we are pursuing in the UK Central North Sea. We have identified a number of drilling prospects on the Block each having strong seismic AVO anomalies and other direct hydrocarbon indicators which possibly suggest the presence of hydrocarbons.”

The Company is initiating the planning for the drilling of the strongest of these prospects, with operations targeted to commence in the first quarter of 2012. The drilling of this well will meet the Company’s obligations under Phase II of the PSC. Several companies have announced intentions to begin drilling in deep water Liberian offshore in the second half of 2011, specifically in Blocks 8, 9 and 15.


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