Definitive Joint Operating Agreement for Muskwa and Godin Areas
CALGARY, Alberta and HONG KONG, Oct. 21, 2013 /PRNewswire/ -- Sunshine Oilsands Ltd. ("Sunshine" or the "Corporation") (HKEX: 2012, TSX: SUO) is pleased to announce that it has signed its previously announced joint operating agreement ("JOA") with Renergy Petroleum (Canada) Co., Ltd., ("Renergy") an affiliate of Changjiang Investment Group Co., Ltd. ("Changjiang") with respect to the Corporation's Muskwa and Godin area oil sands leases ("Leases"). Excluded from the JOA are all of Sunshine's oil sands rights within the carbonate formations contained within the Leases.
Renergy will operate the assets under the JOA as the Operator. In return for a 50% working interest, Renergy has agreed to fund 100% of the initial joint operations conducted on the lands up to a maximum of CAD $250 million (the "Commitment Cap"), which funding shall be deployed at the discretion of Renergy, as Operator, until the earlier of the point when (i) the sum contributed equals the Commitment Cap or (ii) average daily production from the lands over any 20 consecutive days period equals or exceeds 5,000 barrels per day (the "Production Target").
The working interest transfer is not expected to result in any accounting gain or loss due to the accounting treatment of the transaction.
The JOA sets an outside date (the "Outside Date") where the first planned phase of discrete operations ("Phase One") shall be deemed to end if either the Commitment Cap has not been reached or the Production Target has not been achieved, which date is the earlier of: (i) three years from receipt of all required regulatory approvals in respect of Phase One; and (ii) six years from the date of the JOA; as may be extended by events of force majeure.
In the event that the Commitment Cap or Production Target is not reached by the Outside Date, Renergy's working interest shall be reduced to that percentage obtained by multiplying 50% by the greater of (i) the sum of money in Canadian dollars contributed by Renergy under the JOA divided by CAD $250 million and (ii) the average daily production from the lands under the Leases over a 20 consecutive days period divided by 5,000 (the extent of any such reduction, the "Working Interest Clawback").
In the event that Renergy's working interest is reduced pursuant to the Working Interest Clawback by 10% or more, Sunshine has the right to cause Renergy to resign as the Operator and Sunshine to become the Operator.
Sunshine's Board of Directors is pleased that the opportunity in its Muskwa and Godin areas has been recognized through this significant agreement to provide both capital and other commitments.
To the best of the directors' knowledge, information and belief having made all reasonable enquiry, Renergy and Changjiang and the ultimate beneficial owner of Renergy and Changjiang are, as at the date of this announcement, third parties independent of Sunshine and not connected persons of Sunshine (as defined in the Listing Rules).
