LONDON: Zoetic International has agreed to sell its remaining interest in its oil and gas assets located in Colorado, USA against a consideration of $376,000, a news release said.
The disposal consists of assets referred to previously as the “East Denver” interests. The assets subject to the sale include a 7.5 per cent working interest in two leases, eight producing wells, associated surface equipment and a connecting gas pipeline, held by the Company’s wholly owned Colorado subsidiary, Highlands Natural Resources Corporation. The purchaser is True Oil LLC, the operator of the East Denver Assets.
The consideration for the sale of the East Denver Assets is US$376,000, however the Group had a loan secured on the East Denver Assets of US$276,574 from ANB Bank.
After paying ANB Bank, settling historic amounts due to True Oil as the operator of the East Denver Assets and the reassignment and repayment of existing bonding arrangements on the East Denver Assets, the final proceeds due to the Company are expected to be less than US$20,000. Completion of the sale is subject to certain procedural matters and a further announcement will be made when completion occurs.
The sale of the East Denver assets, in combination with the sale of the Kansas assets announced on 27 May 2020, and the wind down of the Montana holdings signals the Group’s exit from the oil and gas business. This will provide a clean break from the Group’s most substantial liabilities and operating costs.
With the completion of these sales, the Group will have materially exited the natural resources sector and will be well positioned to continue the growth of its CBD business as an agile and innovative market leader through the reallocation of Group resources.
Whilst the proceeds of these sales will not be substantial, these transactions have enabled the Group to make considerable reductions to ongoing expenditures and eliminate external borrowings. The ongoing cost base of the Group’s natural resources operations had developed on the basis of a larger business than was ever achieved.
While certain significant costs had already been eliminated during the financial year to 31 March 2020, this financial year will see a much greater reduction in costs, currently anticipated to exceed US$1 million.
The Board is confident that it has crystallised substantial savings during the current financial year and limited the Group’s exposure to the heightened volatility of the natural resources market whilst renewing its focus on the continuing success of its CBD business.
Zoetic International also announced it is in final negotiations of an international distribution contract. This will be the second contract negotiated for international distribution by the executive team. Further details will be announced when contract is executed.
The continued demand by quality distributers for the Company’s Chill products reinforces the Boards decision to push the product offerings into the global market. There will be inevitable hurdles to overcome in the everchanging regulatory world of CBD, but the Board believes the Company is well positioned to be first movers in emerging CBD markets.
Trevor Taylor, Co-CEO of Zoetic, commented, “We are pleased to have agreed the sale of our East Denver Assets, which marks the culmination of over a year’s effort in transitioning from the Company’s origins in the US oil and gas business towards our fast developing CBD business. Making a strategic exit from the Company’s legacy operations has refocused our efforts, leaving us with the bandwidth and resources to maximize the potential of our CBD activities.”
Antonio Russo, Co-CEO of Zoetic, commented, “We are very pleased with the direction our international go to market plan is headed. The strategic partnerships that are coming together give the Company a lot of momentum as the rest of the world starts to use CBD. They will now see what we have witnessed in Colorado for many years.”
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