IFR signs letters of intent for investment and drilling services with Simmons Edeco

Source: press release, 14 January 2021

Simmons Edeco has provided onshore drilling services – and completion and workover services – for nearly 60 years
Simmons Edeco has provided onshore drilling services – and completion and workover services – for nearly 60 years (photo: Simmons Edeco)

International Frontier Resources Corporation (IFR), has announced that IFR and Tonalli Energia, a joint venture between Mexican petrochemical leader Grupo Idesa and IFR, (IFR Group), have signed a Letter of Intent (LoI) with Simmons Edeco, a Canadian based oilfield services corporation and its financing affiliates. The investment is set out in two tranches, of USD 1,000,000 and up to USD 6,000,000, which are subject to certain conditions being met.

Proposed Terms of the Transaction:

Tranche A Financing
Under the terms of the Tranche A Letter of Intent, it is anticipated that the parties will enter into a binding agreement (the Definitive Agreement) pursuant to which Simmons will contribute USD 1,000,000 for development capital at Tonalli’s Tecolutla block in the state of Veracruz Mexico. The estimated total capital required for the TEC- 12 work program is estimated to be USD 1,500,000.

As consideration for the Investment, IFR Group will grant to Simmons, a pre-payout royalty from revenue generated from the Tecolutla block. After payout has been satisfied, a reduced royalty on existing production will be payable for the life of the field.

Tranche B Financing
Under the terms of the Tranche B Letter of Intent, the parties are interested in exploring and negotiating a business agreement pursuant to which Simmons would provide financial and service support in an amount of up to $6,000,000 USD to IFR Group to fund drilling and development work based on the acquisition of interests in additional onshore oil and gas blocks in Mexico. The Tranche B Financing is intended to be negotiated and structured in a manner that allows the IFR Group to draw on available funds to cover these costs.

Conditions of the Transaction
Completion of the proposed Transactions is subject to (i) completion of due diligence where Simmons will conduct financial, geological and operational due diligence and (ii) execution of the Definitive Agreement. All parties will endeavor to complete the requisite due diligence and definitive agreements such that drilling activities can commence at Tecolutla within Q1 2021 in accordance with the terms of Tranche A Letter of Intent.

Simmons and the IFR Group will enter into a services agreement pursuant to which Simmons will provide drilling services from its fleet of fully equipped rigs, as well as other services already operating in Mexico, required for the work at Tecolutla.

Simmons previously provided drilling services to IFR’s Mexican joint venture Tonalli Energia and has been providing onshore drilling services in Mexico since 2015. As a qualified operator under Mexican regulations, Tonalli Energia has a proven track record and is focused on expanding its opportunities in the upstream and midstream oil and gas sector.