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TomCo Energy

  • BY: Andrew Hore |
  • POSTED: 17/04/2009 |

Avenue Group Inc says that it wants to terminate its financing agreement with TomCo Energy, which could lead to TomCo losing its Israeli oil interests.

TomCo and Avenue are partners in the Heletz oil field in Israel. TomCo owns a 50% working interest in the Heletz Licence and a 25% working interest in the Iris Licence which is in the centre of the Heletz field. There are four producing wells in the main licence area, although some have been closed for periods of maintenance since they started producing in July 2008.  At the end of 2008 production was running at around 50 barrels of oil per day.

TomCo paid $1m and issued 12.62m shares at 2p each to acquire 50% of the Heletz-Blur-Kokhav licence and 25% of the adjacent Iris licence. It has also made a contribution of $107,000 to past costs and will pay up to $4.5m in development costs over the next three years.

Avenue claims that TomCo has not paid the additional cash it is supposed to. TomCo says that Avenue has failed to provide TomCo with information about the operations and as a work programme has not been agreed it does not have to pay any cash.

In November 2008, there was a potential plan for five further well workovers and two infill wells, to be drilled in 2009. That was expected to take oil production to 300 barrels per day. If production reached that level then TomCo should pay a further $1.5m according to the agreement.

TomCo is short of cash and it has not published accounts for the year to September 2008. The shares were suspended on 11 February 2009 at 0.35p each, which valued TomCo at £1.88m. Since the suspension TomCo has issued 1.5m shares to GEM Global Yield Fund Ltd at 0.5p each. That raised £7,500.

TomCo says the agreement provides for arbitration proceedings to handle disputes.

Avenue was required to hold its 12.62m shares in TomCo until the beginning of April 2009. Theoretically it can now sell them although it might be difficult to find a buyer.

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