TIDMPELE
RNS Number : 4700K
Petrolatina Energy PLC
15 July 2011
15 July 2011
PetroLatina Energy Plc
("PetroLatina" or the "Company")
Farm-out Agreement in respect of the Company's VMM-28
Exploration Block
Highlights:
-- Farm-out agreement entered into with Shell Exploration and Production
Colombia GmbH ("Shell E&P Colombia"), an affiliate of the Royal Dutch
Shell group of companies, in respect of the Company's VMM-28 exploration
block. The agreement is subject to the approval of the Agencia Nacional
de Hidrocarburos ("ANH").
-- Under the agreement, Shell E&P Colombia will obtain an 85% participating
interest in the block. PetroLatina's Colombian operating subsidiary will
retain a 15% legal interest with an option to participate in the block on
expiry of an agreed exclusivity period and reimbursement of its share of
Shell E&P Colombia's total sunk costs to the date of exercise of the
option. Upon exercise of the option, PetroLatina shall pay, its share of
the ongoing costs, expenses and liabilities associated with the block.
-- PetroLatina will receive a fee of US$15 million in cash, US$3 million on
execution of the agreement and the balance of US$12 million on receipt of
the requisite regulatory approval.
-- Shell E&P Colombia will become operator of the contract and be granted
exclusive operating rights to the contract for a period of 6 years or, if
earlier, until Declaration of Commerciality (the "Exclusivity Period").
-- Shell E&P Colombia will pay for 100% of the costs, expenses and
liabilities associated with the work obligations for the VMM-28 block
during the Exclusivity Period.
PetroLatina (AIM: PELE), the independent oil and gas
exploration, development and production company focused on Latin
America, is pleased to announce that it has entered into a farm-out
agreement with Shell E&P Colombia, effective 12 July 2011.
Under the terms of the agreement, Shell E&P Colombia will
acquire an 85% participating interest in the Company's VMM-28
Exploration and Production contract (the "E&P Contract"),
subject to the approval of the ANH. The VMM-28 block is currently
wholly owned and operated by Petroleos del Norte S.A. ("PDN"),
PetroLatina's Colombian operating subsidiary.
PDN and the ANH signed the formal E&P Contract in March
2011, for the exploration, development and production of
hydrocarbons in the area known as the VMM-28 block. The block
covers an area of 54,552 hectares (approximately 136,390 acres) and
lies to the west of, and immediately adjacent to, the Company's
existing La Paloma block containing the Company's producing Colon
field. Preliminary analysis of the available historic 2D seismic
data suggests that the type of structure which has proven to be oil
productive on the La Paloma block may also potentially hold
commercial oil reserves on the VMM-28 block. The current carrying
value of the Company's interest in the VMM-28 block is
approximately US$4.64 million.
In accordance with the terms of the farm-out agreement, which
remains subject to regulatory approval from the ANH, Shell E&P
Colombia has agreed to pay a fee of US$15 million in cash to
PetroLatina, of which US$3 million is payable on execution of the
agreement and the balance of US$12 million is payable on receipt of
the requisite ANH approval. Shell E&P Colombia will be
appointed as operator of the contract and will take responsibility
for the work programme. In the event that ANH approval is not
forthcoming by 30 September 2011, Shell E&P Colombia has the
right to terminate the agreement and require any payments made by
it to PetroLatina to be repaid.
The VMM-28 E&P Contract comprises two 3 year exploration
periods ("Phase 1" and "Phase 2") followed by a 24 year production
phase. In accordance with the E&P Contract in place with the
ANH, work obligations for the VMM-28 block include the acquisition
of 2D seismic and one exploratory well during Phase 1 (the first 3
year exploration phase), and either two wells without
relinquishment of any acreage or one well with 50% relinquishment
during Phase 2 (the second 3 year exploration phase). Under the
terms of the farm-out agreement, PetroLatina has granted Shell
E&P Colombia a six year period of operational exclusivity.
During this Exclusivity Period, Shell E&P Colombia will pay for
100% of the costs, expenses and liabilities associated with the
work programme and shall be entitled to all rights in relation to
the block.
Shell E&P Colombia will make available to PetroLatina all
data acquired by it in relation to the contract area and ensure
that the licence area remains in good standing and will comply with
all applicable laws, regulations and orders of Colombia.
Under the agreement, Shell E&P Colombia will obtain an 85%
participating interest in the block. PDN will retain a 15% legal
interest with an option to participate in the block upon expiration
of the Exclusivity Period. Under the terms of the farm-out
agreement, PetroLatina shall pay its share of the costs, expenses
and liabilities associated with the block and shall pay Shell
E&P Colombia for its share of Shell E&P Colombia's total
sunk costs incurred to such date, out of PetroLatina's share of
production within the block. Operations on the VMM-28 block would
thereafter be governed by a joint operating agreement.
In the event that Shell E&P Colombia decides to withdraw
from the farm-out agreement, the Company has the option to request
that Shell E&P Colombia transfers its prevailing interest in
the block back to PetroLatina.
Following the receipt of ANH approval, the Company intends to
use the proceeds from the farm-out agreement to assist with the
part funding of its planned ongoing drilling programme and
development commitments in respect of the remainder of its
Colombian asset portfolio and for general working capital
purposes.
Luc Gerard, Executive Chairman of PetroLatina, commented:
"I am extremely pleased to welcome Shell E&P Colombia as our
partner in respect of the VMM-28 contract, who's deep and complex
drilling capability and experience in conventional and
non-conventional reservoirs will be invaluable. The farm-out
agreement provides us with exposure to exploration activity on the
VMM-28 block, including the technology and expertise of Shell,
whilst enabling us to focus our resources on the development of the
other promising assets in our Colombian portfolio, including the
Putumayo-4 E&P block.
The funds received, following the receipt of ANH approval, will
assist with the financing of our ongoing Colombian work programme
whilst we maintain the flexibility of exercising an option to
participate in the promising VMM-28 block in the future. This
agreement serves to demonstrate the level of industry interest in
VMM-28 and more generally in Colombia. We continue to believe in
the potential of both our asset portfolio and Colombia and look
forward to demonstrating and realising such potential as our work
programme progresses."
Mr Menno Wiebe, a Non-executive director of the Company, has
reviewed and approved the technical information contained within
this announcement in his capacity as a qualified person, as
required under the AIM rules. Mr Wiebe is a Petroleum Geologist and
has been a Member of the American Association of Petroleum
Geologists for more than 30 years and a Member of the Geological
Society for more than 7 years.
Enquiries:
PetroLatina Energy Plc Tel: +57 1627 8435
Juan Carlos Rodriguez, Chief Executive Officer
Pawan Sharma, Executive Vice President - Corporate Tel: +44 (0)20 7766
Affairs & CFO 0081
Strand Hanson Limited
Simon Raggett / Matthew Chandler Tel: +44 (0)20 7409
3494
Evolution Securities Limited
Chris Sim / Adam James Tel: +44 (0)20 7071
4304
Financial Dynamics
Ben Brewerton / Chris Welsh Tel: +44 (0)20 7831
3113
Notes to editors:
PetroLatina Energy Plc (AIM: PELE) is presently focused on
Colombia where it currently holds 45% and 20% interests
respectively in the Los Angeles and Santa Luc'a fields on the
Tisquirama licence, and a 100% interest in the Do-a Mar'a field. In
April 2006 the Group acquired an 85% interest in the Midas block
and an 80% interest in the La Paloma block. In November 2007 the
Company secured the extension of the Tisquirama licence for the
economic life of the fields. In February 2009, the Group acquired
the Putumayo-4 block in which it has a retained 50% interest. In
March 2011, the Group signed a definitive contract with the ANH in
respect of the VMM-28 exploration block in the Middle Magdalena
Valley basin. PetroLatina also owns the R'o Zulia-Ayacucho pipeline
in the prolific Catatumbo basin which transports crude oil for
third party customers. Having sold its assets in Guatemala in July
2007, PetroLatina retains a 20% carried interest in the first three
wells drilled and a 20% working interest in any future wells.
Further information is available on the Company's website
(www.petrolatinaenergy.com).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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