2009
Africa Oil Corp.
Oil & Gas Farmout Agreement
We acted as counsel to Africa Oil Corp. in respect of the negotiation and completion of a farmout agreement with Lion Energy Corp. The farmout agreement relates to interests in production sharing contracts in both the Republic of Kenya and the Puntland State of Somalia.
Under the farmout agreement, Africa Oil agreed to transfer to Lion a portion of its license interest in 5 separate production sharing agreements under which Africa Oil has the right to participate in oil and gas exploration and development in Kenya and Puntland (Somalia). Separately the companies negotiated operating agreements describing their joint obligations in respect of the production sharing agreements.
As consideration for the right to participate in the production sharing contracts, Lion agreed to pay a disproportionate share of the costs associated with the planned work programs in each of the areas in 2009 and 2010 and deposited US$ 4 million into escrow as security for its payment obligations.