Karoon executes an agreement to farm out 35% equity in Santos Basin, Brazil Blocks

abarrelfullabarrelfull wrote on 20 Sep 2012 18:36
Tags: brazil karoon pacific-rubiales s-america upstream

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Karoon Gas Australia Ltd (ASX: KAR) and Pacific Rubiales Energy Corp. (TSX: PRE) BVC:˚PREC) (BOVESPA: PREB) have, through their subsidiaries, executed final agreements for PRE to acquire a 35% interest in the Karoon’s wholly owned Santos Basin Exploration Blocks, S-M-1101, S-M-1102, SM-1037 and S-M-1165 with an option to acquire a 35% interest in S-M-1166 ("Blocks"). In consideration for acquiring the interests in the Blocks, Pacific Rubiales will pay Karoon US$40 million in cash as consideration for the assignment and fund up to US$210 million in carried well costs.

Key terms of the transaction

  1. Pacific Rubiales will pay Karoon US$40 million, as consideration for the assignment.
  2. Pacific Rubiales will carry up to the first US$70 million in well costs for each of the first two wells in the upcoming Santos Basin exploration program, Kangaroo and Emu/Cassowary, for a cumulative total of US$140 million in well carry. After meeting the first US$70 million in well costs for each of the first two wells, Pacific Rubiales will meet 35% of all costs thereafter.
  3. Pacific Rubiales may elect to participate in the third and final well in the three well exploration program, Bilby. If the option is exercised, Pacific Rubiales must again carry up to the first US$70 million of well costs for the Bilby well and contribute its 35% share of all well costs over and above the well carry commitment on the Bilby well.
  4. The transaction is conditional on obtaining regulatory approval from the Agencia Nacional do Petroleo ("ANP") of the assignement.
  5. Karoon will remain operator of the Blocks during the three well exploration phase and Pacific Rubiales will be entitled to request the operatorship after such time, subject to the completion of its farmin commitments, and compliance of all regulatory and other legal requirements to the satisfaction of the ANP.

Block Background
Karoon’s Santos Basin Blocks are located 112 kilometres off the coast of the Santa Catarina region of Brazil, south of Rio de Janeiro. The Santos Basin has recently yielded multiple oil discoveries and is becoming an exciting area for exploration. Karoon was awarded 100% participation in the Blocks in the Santos Basin, Brazil during 2008. The five Blocks total 865 square kilometres.

In the shallow water Santos Basin, several recent discoveries have also been made which have similar geological characteristics to Karoon’s Blocks, such as the Sabia, Piracuca, Tiro, Sidon, Guaiama, Panoramix and Vampira discoveries all in the same trend as the previously discovered Merluza, Mexilhao and Caravela fields. These fields have collective resources in the billions of barrel of oil equivalent in-place.

Drilling is set to commence with the drilling of Kangaroo-1, to be followed by Cassowary-1/Emu-1 and Bilby-1. The mean unrisked prospective resource sizes for the target wells are between 100 and 300 million barrels of oil. Each of these wells targets between 100-300 million barrels of hydrocarbons. In addition, the operator neighboring Karoon’s Blocks, Pan Atlantic, has made one discovery at Sabia-IX, will be drilling the Canario-1 well in late calendar year 2012. The Canario prospect is known as Kookaburra to Karoon, as it straddles the border of Karoon’s Block.

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