In 2011, through its then subsidiary PNG Energy Limited (“PNG Energy”) and that company's wholly owned subsidiary Gini Energy Limited (“Gini Energy”), UMC Energy acquired Petroleum Prospecting Licences (PPLs) in Papua New Guinea.
On 26 March 2012, the Company entered agreements with a subsidiary of CNOOC Limited (“CNOOC”), the Chinese multi-national oil and gas company listed on the New York, Toronto and Hong Kong Stock Exchanges, whereby CNOOC subscribed for a 70% equity interest in PNG Energy and UMC Energy retained a 30% equity interest.
Pursuant to the agreements, and in consideration for the share subscription, CNOOC will be responsible for funding all expenditure in respect of the PPLs required to comply with the minimum work obligations during the exploration phase. Such expenditure will be repaid to CNOOC out of production revenues and off take of oil and gas once the assets of Gini Energy enter production, should such production occur. If exploration and appraisal work indicates the probable existence of commercial reservoirs of oil or gas in any part of the PPLs at the end of the exploration phase, the parties must each finance their pro-rata share of all expenditure required in respect of the development plan either themselves or by procuring sufficient finance from a third party.
In addition, the agreements entitle CNOOC to appoint two directors to the boards of each PNG Energy and Gini Energy, with the Company entitled to appoint one director to each board.