Linc Energy to Merge with SAPEX

12 June 2008

Linc Energy, the Australian company developing the Chinchilla Underground Coal Gasification (UCG) to Gas to Liquids (GTL) facility, will merge with SAPEX, an oil and gas exploration company based in South Australia, in a deal that values SAPEX at approximately $104 million.

Linc is offering 72 cents per SAPEX share and 50 cents per SAPEX option. The boards of both companies unanimously support the offer.

The deal will combine Linc Energy’s UCG and GTL capabilities with SAPEX’s coal resources.

SAPEX holds seven Petroleum Exploration Licenses (PEL) covering some 65,000 sq km, essentially the entire oil and gas prospective area of the underexplored Arckaringa Basin in central South Australia; and within that area two mining exploration licenses (EL) covering Weedina (EL 3326) and Wintinna East (EL 3325) which are also amenable to UCG.

The region has the potential for significant discoveries of oil and gas and is also expected to have coal seam gas (CSG) potential from the known sub-bituminous coal deposits. SAPEX also holds PEL 120, near Adelaide, which also is expected to have CSG/UCG potential with recently granted ELs 4147/8 covering areas of immediate interest.

In July 2007, the two companies signed a Memorandum of Understanding (MoU) under which Linc would identify suitable locations within Sapex’s South Australian licence areas to establish Underground Coal Gasification (UCG) fields for the co-production of power and Coal-to-Liquids (CTL) Diesel.(Earlier post.)