Transeuro Energy Corp.
TSX VENTURE : TSU
OSLO STOCK EXCHANGE : TSU

Transeuro Energy Corp.

September 01, 2009 10:27 ET

Transeuro Energy Corp.: Proposed Resolution of Ukraine Joint Venture Dispute

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 1, 2009) - Transeuro Energy Corp. ("Transeuro" or the "Company") (TSX VENTURE:TSU)(OSLO:TSU) announces that the Company has signed a Term Sheet with Rohol-Aufsuchungs Aktiengesellschaft ("RAG") based on which the parties plan to finalize binding agreements to settle the dispute pertaining to the purported withdrawal by RAG from the joint venture company 'Scythian Energy BV'. The Term Sheet states that the final settlement will be based on:

- The global mutual release from all accrued rights and obligations with regards to the joint venture operations in Ukraine, including the claim raised by RAG for repayment of USD 13,473,403 plus interest and Transeuro's potential counterclaim for costs, losses and damages.

- The transfer of RAG's 50% shareholding in Scythian Energy BV to Transeuro immediately upon entering into the Settlement Agreement for no or nominal consideration.

- The granting by Transeuro to RAG of a call option for 12.5% of the shares in Scythian Energy BV (the "Call Option"). The call option is valid until Scythian Energy and its subsidiaries have invested a further USD 70 million.

- Adjournment of the ICC arbitration proceedings during the validity period of the term sheet, the negotiation of the full settlement agreement (the "Settlement Agreement") and termination of the ICC arbitration proceedings immediately after transfer of the Scythian shares.

- At any time prior to the exercise of the Call Option by RAG, Transeuro shall be entitled to buy back RAG's Call Option for the purchase price of USD 13,473,403 plus interest calculated at 12 months' USD LIBOR + 3.5%.

- The call option shall be backed by a pledge by Transeuro on 12.5% of Scythian Energy shares in favour of RAG. Transeuro shall be entitled to divest, pledge and/or mortgage up to 87.5% of the shares in Scythian Energy BV to any third party(ies) (including any new investor or financing entity) without requiring any prior approval from RAG and on such terms as may be negotiated by Transeuro with such third party(ies) at its sole and unfettered discretion.

- This Term Sheet is valid for a period of thirty (30) days from 20th August 2009. During the validity period, the parties shall make their best endeavours to (i) finalize a Settlement Agreement (ii) draft the Shareholder Agreement and (iii) transfer 50% of RAG's shares in Scythian Energy BV to Transeuro.

In addition the Company has agreed with the Ukraine government to complete the process for renewing both the Karlavskoye and Povorotnoye licenses for 'Exploration and Pilot Production'. The licenses will be re-issued to the local joint venture partner 'Crymgeologia' with whom Transeuro holds Joint Activity Agreements. Initial payments have been made towards each license renewal and the Company expects to receive the final license in due course over the next few months.

The Company has retained 'Integra Group' (http://www.integra.ru/eng/) to inspect the 'Uralmash' type drilling unit provided by Crymgeologia and to advice on the necessary rig upgrades required to complete the sidetrack of the Karlavskoye 101 well. Integra Group are the new owners of 'Uralmash' and are best placed to assess the rig condition and to supply the necessary compatible equipment.

Given the difficulties experienced by many international companies within the Ukraine E&P sector the Company has initiated an overall review of the Ukraine Business Opportunity to be conducted by AGR/Tracs (http://www.agr.com/). The review will include an assessment of the operating environment in Ukraine with particular emphasis on the Joint Activity Agreement relationship with Crymgeologia; the legal and regulatory framework governing industry activity; the potential value of the Karlavskoye and Povorotnoye fields with particular emphasis on the gas sales market and recommendations on how best to resume activities. The report will be released to investors around the end of September.

David Worrall, Transeuro President & CEO, commented, "RAG's decision to retain an interest in Scythian Energy emphasizes the underlying potential of our Ukraine assets and supports our position that we can progress operations through to a successful conclusion. We remain aware of the challenges of operating in Ukraine and have initiated a number of reviews to gain an objective assessment of the environment that will assist us in deciding our way forward."

Transeuro Energy Corp. is involved in the acquisition of petroleum and natural gas rights, the exploration for, and development and production of crude oil, condensate and natural gas. The Company's properties are located in Canada, Armenia, and Ukraine. In addition, the Company owns shares in Eaglewood Energy Inc. and holds a back-in option.

On behalf of the Board of Directors

Aage Thoen, Chairman

The statements contained in this release that are not historical facts are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from the targeted results. The Company relies upon litigation protection for forward looking statements.

The TSX Venture Exchange and Oslo Bors have not reviewed, and do not accept responsibility for the adequacy or accuracy of the content of this news release.

Contact Information

  • Transeuro Energy Corp.
    David Parry
    SVP
    +1 604 681-3939
    or
    Transeuro Energy Corp.
    Karen Jenssen
    IR
    +47 91 729787
    www.transeuroenergy.com