General News | Deals - Acquisition, Mergers, Divestitures

Target Sees Complications in Permian Deal with Aurora

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Target Energy Ltd. has reported a corporate update in regard to its recent transaction with Aurora Energy Partners.

The sale of a 10% Working Interest in the Fairway Project to Aurora Energy Partners, a Texas general partnership in which Victory Energy Corporation owns a 50% interest and serves as managing partner, was to have been completed this week. Aurora has advised Target that it will not provide the funds to complete the transaction at this time.

As previously advised, in response to external delays in completing conveyancing of titles, the Purchase and Sale Agreement signed by Target's wholly owned subsidiary TELA Garwood LP and Aurora on 30 June 2014 split the closing of the sale into two parts.

The first part was completed on 30 June 2014, with Aurora making a payment of A$2.7m (US$2.5m) to TELA Garwood and in return TELA Garwood assigning to Aurora a 10% working interest in its Darwin, BOA and Wagga Wagga production leases and in other leases.

The parties had agreed to extend the Second Closing to 10 September 2014, with Aurora due to make a payment of A$2.1m (US$1.91m) to TELA Garwood for the balance of the assignments in all other leases in the Fairway Project.

As the interests in the Sydney leases remain subject to further documentation from the operator, Target and Aurora agreed to exclude the sale of those interests from the transaction with a consequent reduction in the Second Closing proceeds of US$1.1m (A$1.15m).

Aurora failed to make the requisite payment for the Second Closing by the agreed 10 September 2014 date. Target is in ongoing discussions with Aurora to resolve the matter.

Managing Director Laurence Roe commented: "We are disappointed that Aurora failed to meet its obligations regarding the Second Closing in a timely manner. We are now consulting with our advisers as to the most effective way forward.

"While we address the position surrounding the timing of the Second Closing, we have also considered it prudent to defer the 1/6^th redemption offer to noteholders.

"In respect to the Sydney leases, recent title work has raised some issues regarding the exact working interests held by the individual partners, including Target. Whilst Target does not expect these title issues to have a material impact, and expects to be compensated in the event of any adverse adjustment, we are working to clarify the position as quickly as possible and will update the market as soon as practicable. Until our position is clarified Target will not divest any interest in the Sydney tract."