ECOTEQ ENERGY ASA OSLO NORWAY - 27 May 2024
Ecoteq Energy ASA ("Ecoteq" or the "Company") announces that it has received a letter dated 16 May 2024 from Valkor Energy Holdings, LLC, a Utah limited liability company, notifying the Company and its wholly owned subsidiary, Ecoteq Energy USA LLC (formerly Valkor Environmental LLC) ("EUSA"), that, under the terms of a Restated and Amended Sale and Purchase Agreement dated 15 November 2022 between Valkor and EUSA (the "2022 Agreement") - under which Valkor assigned to EUSA the exclusive right to explore, mine, produce and market crude oil (bitumen and heavy oil) and other substances from shallow bituminous sands (oil sands) deposits located in certain lands in the Asphalt Ridge area of eastern Utah (the "Utah subleased lands") - EUSA failed to:
provide documentation within 18 months after the date of the 2022 Agreement that reasonably demonstrates Ecoteq's (EUSA's) financial ability to provide capital funding for the design and construction of a $100 million oil sands plant to be located on the Utah subleased lands, and pay Valkor for EUSA's share of annual lease maintenance fees (annual rent and minimum royalty) under Valkor's master lease with the State of Utah and under which Valkor previously assigned to EUSA the exclusive operating rights in the Utah subleased lands.
Valkor's 16 May 2024 letter further advised that, if EUSA failed to cure the defaults within 45 days, Valkor would pursue appropriate legal or arbitration actions against EUSA, including a quiet title action seeking a judicial or arbitral declaration that the 2022 Agreement and the assignment of oil sands operating rights to EUSA have been terminated. Such actions, if taken by Valkor, would likely force the Company and EUSA to incur substantial litigation or arbitration fees and costs (including attorneys' fees) in defending against Valkor's claims in the U.S. The Company and EUSA would also risk having to Valkor's litigation costs and fees if Valkor prevailed in its claims.
The Company is currently facing financial difficulties since its former Chief Executive Officer failed to perform on his obligations and resigned from the Company effective 30 April 2024, leaving the Company with limited cash and cash equivalents and with no ability to raise cash and capital in the Norway, London or U.S. markets. As a result, the Company determined that it would not be able to provide the financial demonstration required by Valkor and does not currently have the resources to pay EUSA's share of annual lease maintenance fees and charges (which continue to accrue monthly) or to engage in protracted litigation with Valkor in the U.S. Under these circumstances, the Company's board of directors determined that it would be in the bests interests of the Company and its shareholders to resolve Valkor's claims by settlement and compromise since no other viable alternative existed for the Company.
In the absence of a Chief Executive Officer, the Company relied upon Raymond Gerald Bailey, its Chairman, to assume a leadership role in the Company and negotiate a resolution of Valkor's claims under terms that protects the Company from losses or liabilities under the 2022 Agreement and avoids costly and protracted litigation or arbitration in the U.S. Under the settlement, Valkor agreed to release and discharge the Company (and EUSA) from any claims for payment of EUSA's share of annual lease maintenance fees and charges for the Utah subleased lands, (2) the Company and Valkor agreed to a mutual release of claims against each other arising from the 2022 Agreement, Valkor's assignment of oil sand operating rights to EUSA in the Utah subleased lands and the Company's acquisition of EUSA, and other related matters, and (3) the Company agreed to transfer its ownership and control of EUSA back to Valkor.
The closing of the settlement with Valkor was completed on 23 May 2024, with the Company having completed the transfer of ownership and control of EUSA to Valkor.
In the settlement with Valkor - despite the Company's return of ownership in EUSA to Valkor - the Company believes that it will not incur any economic harm since the Company has been able to maintain its business relationship with Valkor in the event that the Company decides to pursue oil sands development opportunities in Utah in the future. Under the settlement, Valkor has committed to continue to explore oil sands development opportunities with the Company in eastern Utah once the Company can demonstrate that it has the ability to secure capital funding for the design and construction of an oil sands processing facility in the Asphalt Ridge area.
We will continue to keep our shareholders apprised of all material developments.
R.G. Bailey
Chairman
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Ecoteq Energy ASA published this content on 27 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 May 2024 09:34:09 UTC.
