Adira Energy Ltd., Toronto, said its Israel subsidiary entered into a settlement and release agreement with Modi’in Energy LP and Brownstone Energy Inc. that resolves the companies’ previously disclosed disputes over their respective funding obligations and related suspension of operations on the Gabriella license nearshore Israel.
The companies agree to waive and release each other from any claims and demands they may have with respect to the license and will fund their proportionate share of costs associated with the license incurred in connection with the attempted drilling of the first well.
The agreement is subject to Modi’in unitholder approval, which is expected to be received within 10 days. Adira’s net share of the costs total $3.2 million and is payable in stages over a 90-day period after Modi’in unitholder approval.
Adira noted that despite confirming contingent resources on Gabriella and having a drilling rig on site, the companies were unable to execute the drill program. Adira is assessing finance options to maintain its interest in the license.
The agreement also provides the companies with tag-along rights for 1 year to participate in any farmout of their participating interests in the Gabriella license consummated by the other members. In addition, Adira agrees to relinquish its 15% buy back option and management fee and reduce its overriding royalty interest to 2.625%.
In the event that Adira does not pay its share of abovementioned costs, at Modi’in’s request, Adira may withdraw from the joint operating agreement and assign its participating interest in Gabriella to the remaining participants and will relinquish its remaining royalties.
Adira on June 30 applied to Israel’s Ministry of Energy and Water for an extension of the dates for the execution of a drilling contract on Gabriella to Feb. 28, 2014, and for the spud of the first well to Dec. 31, 2014. It also applied for an extension of the dates for the execution of a drilling contract on the Yitzhak license off Israel to Sept. 30, 2014, and for the spud of the first well to June 30, 2015.