"We are going full steam ahead for drilling at the Gabriella license. We reached a better deal with Noble Drilling for drilling this well, subject to the Ministry of Energy and Water Resources timetable," Modiin Energy LP (TASE:MDIN.L) CEO Ron Maor told "Globes". The Gabriella license's work plan states that drilling must begin by June 2013. The first stage of the well will cost $96 million, and the second, production, stage will cost $34 million.
Modiin Energy, controlled by Tzahi Sultan and IDB Development Corp. Ltd., controlled by Nochi Dankner, has amended its agreements for operations by the Homer Ferrington rig, owned by Noble Corporation (NYSE: NE).
In the past two weeks, Modiin Energy's share price has plummeted. Last week, the company notified the TASE that the owner of Homer Ferrington rig, which is due to drill in the Yam Hadera license, gave it two business days to provide a $37 million letter of credit, pursuant to the drilling agreement between the parties.
After negotiations, Modiin Energy succeeded in cancelling drilling at the Ishai license by the Homer Ferrington rig, after supplying the rig's operator with $14 million worth of previously purchased equipment.
Modiin Energy also reduced the rig's daily work cost to $415,000 from $500,000, and the waiting time cost to $300,000 for the first ten days, and less for subsequent waiting. After 75 waiting days, the Gabriella licensees have the right to continue paying a special waiting fee and to offer the rig's owners the right to cancel the agreement. Modiin Energy will also immediately pay $2.5 million, which will be deposited for the rig's transportation and drilling costs. The Gabriella licensees will provide the rig's owners with a $20 million letter of credit by January 31.
Modiin Energy said, "To meet these agreements and its share of the letters of credit and Gabriella license drilling costs, the company will immediately have to hold an offering to raise capital. As part of the company's financing preparations for the Gabriella license drilling, it is seeking additional partners, which will reduce its share of the license."
The 392-square kilometer offshore Gabriella license is located 10 kilometers northwest of Tel Aviv, in water ranging from 100 meters to 425 meters. Modiin Energy owns 70% of the license, and Canadian companies Adira Energy Corporation (TSXV: ADL; Bulletin Board: ADENF; XETRA: AORLB8), and Brownstone Energy Inc. (TSX: BWN; Bulletin Board: BWSOF) subsidiary Brownbarb (Israel) Ltd., each own 15%.
Published by Globes [online], Israel business news - www.globes-online.com - on December 23, 2012
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