Latin America-focused Andes Energia (LON:AEN) laid out the case for its potential investment in Interoil Exploration and Production in a conference call on Thursday.
The company announced the agreed bid for the Norway-based but Latin America-focused company just before Christmas.
Andes will seek approval on 20 January from Interoil’s shareholders and bond holders for a set of proposals that will see Interoil issue 330mln new shares to Andes at a total cost of US$4.95mln, and a restructuring of Interoil’s debt.
If the deal goes through, Andes will assume control of a number of Colombian assets, including the highly prospective LLA-47 exploration licence.
Time is pressing, because Interoil needs to post the required bank guarantees for its LLA-47 permit this month in order to retain it – and even that outcome is dependent on Interoil successfully appealing against the termination of the LLA-47 licence, and another licence (Cor-6), by the National Agency of Hydrocarbons (ANH) in Colombia.
Interoil said US$7.5mln in bank guarantees are due this month, and another US$10.5mln is due by the end of April 2015.
If the guarantees are not placed, ANH will terminate the licence contracts on LLA-47 and Cor-6 due to non-compliance and will impose a penalty of US$46mln.
The merger with Andes would provide Interoil with a new majority shareholder with a presence in Latin America that is willing to support its future endeavours.
Andes Energia’s chief executive, Alejandro Jotayan, said the new senior management will be based in Latin America, though Interoil would retain its stock market listing in Oslo.
Jotayan said the company strongly believes in the potential of LLA-47 and intends to develop the prospect as swiftly as possible.
Asked about future financing of development work on Interoil’s assets, Jotayan said it would be funded “from existing cash, local debt, cash flow and, potentially, new partners”.
The company said it had extensive and constructive discussions with Interoil’s bond holders but won’t truly know the outcome of those talks until the bonds holders meeting next Tuesday, at 8.00am UK time. The meeting for the shareholders is at noon on the same day.