EnerGulf entered into a letter of intent (“LOI”) with Texas South Energy, Inc. (OTCBB: TXSO) (“TexSo”) (see News Release dated June 9, 2016) to participate in six offshore Gulf of Mexico prospects owned and operated by GulfSlope Energy Inc. (“GulfSlope”) (OTCBB: GSPE). Subject to the execution of definitive agreements and the Company’s financial obligations therein, the LOI provides for participation by the Company in drilling one well on Block 378, Vermilion Area, South Addition (“Canoe Prospect”) and a second well on either the Canoe Prospect or Block 375, Vermilion Area, South Addition (“Selectron Shallow Prospect”). The Company has made a US$200,000 payment for its interest in the Canoe Prospect and paid an additional US$200,000 for its interest in the Selectron Shallow Prospect. At this point the Company has earned the right to a 19.5% non-operated working interest in each of the Canoe and the Selectron Shallow prospects in the Gulf of Mexico and will have certain cost interest obligations in the Canoe and Selectron Shallow Prospects. The Company elected not to make a $400,000 payment to earn participation in the deep prospects (Alpha, Beta, Baryon, and Proton) and additional interests in the Canoe and Selectron Shallow prospects at this time. The Company is renegotiating the terms of such participation at this time.
As additional consideration, EnerGulf has agreed to issue to TexSo a warrant to purchase up to 7,000,000 common shares of EnerGulf exercisable for a three year term at a price of CDN$0.06 per share. The issuance of the proposed bonus warrants and the proposed acquisition of the Canoe and Selectron Shallow Prospects remains subject to acceptance by the Exchange.
The Company entered into a US$200,000 bridge loan with a fund controlled by a Company director, to make the payment for the Selectron Shallow Prospect. The Company has agreed to pay a US$20,000 commitment fee on maturity and, in addition, to issue to the lenders, as a bonus for making the Loan, warrants exercisable to purchase up to 3,000,000 shares of the Company for $0.05 each until the first anniversary of the date of the Loan advance. The Loan Agreement also provides that if the Exchange does not accept the TexSo Agreement for filing by October 25, 2016, or if the Borrower’s filing in respect of the TexSo letter agreement is withdrawn or abandoned by the Company or deemed to be withdrawn by the Exchange at any time prior to October 25, 2016, then in lieu of repayment of the principal amount of the Loan and payment of the commitment fee, the Borrower will assign to the Lender, at the deemed price of US$220,000, all of the Borrower’s rights relating to the Selectron Shallow Prospect under the TexSo LOI.