SAN FRANCISCO, Aug. 25, 2013 (GLOBE NEWSWIRE) -- Summa Resource Holdings LLC announced today that it continues to pursue its Dispute with Carbon Energy Limited of Brisbane, Queensland, Australia (ASX: CNX; CNXAY: OTCQX:CNXAY) under the Share Sale Agreement dated February 23, 2011. Pursuant to that agreement, Carbon Energy acquired project agreements for development of Underground Coal Gasification (UCG) projects in Wyoming, North Dakota and the Republic of Turkey. In each of these markets, the project partners associated with the Share Sale Agreement represented some of the largest coal owners in their respective market. The total purchase price was US$19,000,000 to be paid in Carbon Energy stock. Substantially all of the initial purchase price shares equal to US$10,000,000 in purchase price were subject to escrow, with US$9,000,000 in Carbon Energy stock to be issued upon satisfaction of certain Milestone events. During the escrow periods, the market value of Carbon Energy declined dramatically. Summa served as sellers' representative for a group of shareholders, investors, UCG project developers and UCG technical and operating personnel. Carbon Energy elected to not employ any of the UCG project development specialists and technical experts.
In March 2013 Carbon Energy announced that it would not pay Summa the US$9,000,000 due in Milestone payments. In July, 2013 Carbon Energy confirmed it would not move forward to develop the UCG projects acquired from Summa. Summa contends that the Milestones were achieved and that the Milestone payments are due in full. Summa informed Carbon Energy that it has commenced a Dispute, pursuant to the Share Sale Agreement.
At the time of the agreement, the average price per share of Carbon Energy stock (ASX:CNX) used for calculating purchase price shares was approximately AUS$ .36 per share. At February 23, 2013, the two-year anniversary of the Share Sale Agreement, the price per share of (ASX:CNX) was AUS$ .04 per share. As of August 23, 2013 the price of (ASX:CNX) was AUS $.02 per share.
At February 23, 2013 the number of shares of Carbon Energy required to satisfy its contractual obligations to Summa and other CCL Sellers was approximately 180,000,000 shares, representing approximately 20% of the then outstanding shares of Carbon Energy. Based on the closing price per share of Carbon Energy at August 23, 2013, Carbon Energy would be required to issue approximately 450,000,000 shares to Summa to satisfy its contractual obligation under the Milestone payments. In July 2013 the Carbon Energy board of directors announced a Rights Offering at AUS$ .02 per share. Summa is analyzing the Rights Offering to determine if the number of shares to be reserved and paid to Summa shall be increased due to the dilutive effect of the proposed Rights Offering. The Share Sale Agreement requires Carbon Energy to reserve sufficient shares to satisfy its obligation to Summa until such time as any Dispute is resolved or otherwise settled.
Summa management remains disappointed that Carbon Energy did not pursue the projects in North America and Turkey, any of which Summa believes would have created value for Carbon Energy and its shareholders. Summa intends to fully pursue all potential legal protections and remedies in Australia, the United States and any and all jurisdictions – related to the milestone payments under the Share Sale Agreement, related to the performance of the Company during the time shares issued to Summa were subject to an escrow agreement, and related to governance of Carbon Energy since February, 2011.
As the dispute continues, Summa intends to actively seek corporate strategic partners and investors that may be interested in participating in UCG and other projects related to the Carbon Energy assets and in the development of a comprehensive business development and corporate finance strategy to recapture and rebuild shareholder value in Carbon Energy.