Canadian Overseas Petroleum Signs Agreement with ExxonMobil for Offshore Liberian Block

abarrelfullabarrelfull wrote on 17 Nov 2011 14:39
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Canadian Overseas Petroleum Limited (“COPL” or “the Company”) (TSX-V:XOP) is pleased to announce that Canadian Overseas Petroleum (Bermuda) Limited (“COPL B”), a wholly owned subsidiary of the Company, has signed an Asset Acquisition Agreement with ExxonMobil Exploration and Production Liberia Limited (“ExxonMobil”), a wholly owned subsidiary of the ExxonMobil Corporation, with respect to the onward sale of certain of the interests in Block LB-13 offshore Liberia which, as previously announced on May 18, 2011, COPL B has agreed to acquire from the current owner.

Under the terms of the sale, which is subject to the approval of the National Oil Company of Liberia (“NOCAL”) and the Government of Liberia and to the satisfaction or waiver of other closing conditions, ExxonMobil will acquire a 70% interest in the Production Sharing
Contract (“PSC”) governing Block LB-13 immediately following COPL B's acquisition of a
100% interest from the current owner. In return, ExxonMobil will pay COPL B US$55
million and pay COPL B’s portion of the first well to be drilled on Block LB-13 to a
maximum of US$36 million. If less than US$36 million is spent on COPL B’s proportionate
cost for the first well, the balance will be applied towards COPL B’s costs of a second well if drilled. Additionally, ExxonMobil will pay COPL B’s share of joint venture costs estimated
at approximately US$6 million up to the completion of the first well. COPL B’s equity
interest in the PSC (Block) will be 30% upon closing and ExxonMobil will be the PSC’s
(Block’s) designated operator.

The approval of NOCAL and the Government of Liberia is still required for the original
proposed acquisition of Block LB-13 by COPL B from its current owner. Discussions are
ongoing between the current block owner, COPL, the Government and NOCAL but consent
has not yet been forthcoming, and there is no assurance that such consent will be granted.

As previously announced, COPL and COPL B have agreed with the current owner, subject to certain conditions being satisfied or waived, to pay a purchase price of US$85 million for a 100% interest in LB-13. The purchase price is to be satisfied by between US$45 million and US$50 million in cash and the remainder through the issuance of common shares of COPL priced at US$0.5473 per share.

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.

Page 2 Block LB-13 covers an area of approximately 2,400 square kilometres. The Block is
governed by a PSC having an 8-year term that commenced in May 2007. The PSC is divided
into three 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 commenced in May 2011.

In 2010, 2,200 square kilometers of long offset 3D seismic was shot to evaluate the oil
potential of deep-water Cretaceous sands analogous to the recent deep-water oil discoveries offshore Ghana and Sierra Leone. Reviews of the seismic data conducted internally by the Company, and externally by independent reserve evaluators DeGolyer and MacNaughton (“D&M”), have identified the potential for a number of Cretaceous turbidite sand stratigraphic traps on the Block that possess strong seismic AVO anomalies and other direct hydrocarbon indicators which possibly suggest the presence of hydrocarbons.

At the request of the Company, D&M has prepared an independent report in accordance with National Instrument 51-101 evaluating the Prospective Resources attributed to Block LB-13 (“the Report”). In the Report, Gross Prospective Oil Resources recoverable are estimated to be the following: P90, 1.359 billion Bbls; P50, 2.314 billion Bbls; P10, 3.829 billion Bbls; PMean, 2.489 billion Bbls. The prospective resources estimates presented are based on the statistical aggregation of the prospects evaluated. It should be noted that there is no certainty that any portion of the Gross Prospective Oil Resources estimated in the Report will be discovered, or if discovered, will be commercially viable to produce any portion of the prospected resources evaluated.

Arthur Millholland, President and CEO of COPL, commented: “We are very pleased to
work with ExxonMobil on this project. Offshore West Africa is an exciting region for oil
exploration, and though lightly explored to this point, we believe the Liberian basin holds
tremendous promise. We look forward to partnering with the Liberian government and
NOCAL to invest in and progress the developing oil and gas industry within the country.
Based upon our interpretation of the seismic data for the block, we think LB-13 could be the catalyst for the people of Liberia and for COPL as an international oil company.”

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