WesternZagros to Receive Insurance Claim for Hasira 1 Well in Iraqi Kurdistan

Source: www.gulfoilandgas.com 10/18/2016, Location: Middle East

WesternZagros Resources Ltd. announces two news items. The first is that the Company has entered into a letter agreement with its major shareholder, Crest Energy International, LLC, to further extend the date by which the Company must deliver to Crest the first drawdown notice for both debt tranches. The second is that the Company has received $5.5 million of insurance proceeds related to the Hasira-1 well.

The most recent amendment to the Company's debt facility and the receipt of insurance proceeds both strengthen the Company's financial flexibility and better align the timing of the debt availability with the anticipated capital needs. The latter being achieved by further amending the US$200 million unsecured credit facility provided by Crest in a loan agreement between the parties dated August 14, 2014, as previously amended on April 26, 2016 (the "Loan Agreement").

Amendment to Loan Agreement

Pursuant to the terms of the Loan Agreement, Crest has agreed to provide debt financing to the Company of up to US$200 million in two tranches. One tranche is for up to US$50 million (the "$50M Tranche") and the other tranche is for up to US$150 million (the "$150M Tranche"). Once an initial draw has been made under a tranche, the drawn amounts accrue interest at 14 and 12 percent per annum under the $50M Tranche and the $150M Tranche, respectively, and the undrawn amount under the tranches accrues a commitment fee of 8 percent per annum.

Pursuant to the Amending Agreement, the Drawdown Deadline for the $50M Tranche has been extended from November 1, 2016 to March 1, 2017. In addition, the maturity date for this tranche has also been extended from November 1, 2018 to March 1, 2019. The Drawdown Deadline for the $150M Tranche has been extended from April 1, 2017 to August 1, 2017, with a corresponding extension of the maturity date for this tranche from April 1, 2019 to August 1, 2019. This deferral of the deadlines provides the Company with an opportunity to reduce commitment fees and interest costs as it does not expect to need to access any funds until the first quarter of 2017 based upon the currently anticipated level and timing of capital expenditures.

All other terms of the Loan Agreement remain in effect unamended, including the above-mentioned interest rates and commitment fees, as well as the condition precedent to drawdown that nothing has occurred since the closing of the Loan Agreement on November 18, 2014 (the "Closing Date") which could reasonably be expected to have a material adverse effect on the Company (as defined in the Loan Agreement). The Amending Agreement preserves Crest's right to determine if a material adverse effect has occurred since the Closing Date at the time that any drawdown notice is provided by the Company.

Hasira-1 Well Insurance Proceeds

The Company has received US$5.5 million from an insurance claim related to the drilling program for the Hasira-1 well, where testing of the well had to be prematurely terminated in early 2015 due to a considerable influx of reservoir formation debris plugging the tubing. The Hasira-1 well was safely suspended in the third quarter of 2015 and future options to utilize the well bore continue to be evaluated.

Including the well insurance proceeds, the Company has approximately $32 million in cash and cash equivalents as of September 30, 2016.


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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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