Canadian Overseas Petroleum Limited (LONCOPL) shares doubled on Thursday as the oil and gas junior announced a settlement in principle regarding its dispute with Essar over the OPL 226 prospect off the coast of Nigeria.
The agreement will see COPL’s 50% owned affiliate ShoreCan transfer 70% of its stake in Essar Nigeria to Essar Mauritius in return for an end to the legal action brought by the Indian conglomerate.
Essar Nigeria’s sole asset is a 100% interest and operatorship of OPL 226, which lies 50 kilometres offshore in the central area of the Niger Delta.
Through the agreement, Essar Mauritius will grant Shorecan a 10% carried interest (capped at US$5mln net) on all costs relating to the drilling of a first appraisal well at OPL 226.
Essar Nigeria will also now seek an extension of the production sharing contract for OPL 226 beyond the current term that ends on September 30.
In future, ShoreCan will have the option to increase its shareholding in Essar Nigeria from 10% to 30% by paying 20% of historic expenditures through the first appraisal well.
In a statement, Arthur Millholland, COPL’s president and chief executive, said: "This is a great outcome for the company in these uncertain times. We look forward to the future working relationship with Essar to unlock the potential of OPL 226."
Shares in COPL jumped 116% to 0.16p.