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PetroNova and Pacific Rubiales form farm-out agreement

03rd March 2014

The contract involves the exploration and development of PetroNova's Tinigua block, which is considered one of the largest unexplored prospects in Colombia

The Tinigua block is around 105,471 gross acres in size and is located in the northern part of the Caguan-Putumayo Basin

PetroNova Inc.,an exploration and production company that centers on the development of oil and gas resources in Colombia, announced that its subsidiary, PetroNova Colombia Inc., has formed a farm-out agreement (FOA) with a subsidiary of Pacific Rubiales Energy Corp. The contract, which was awarded by the Agencia Nacional de Hidrocarburos of Colombia (ANH), involves the exploration and production of PetroNova's Tinigua block. PetroNova has 9 per cent owenership over of the rights to the Tinigua contract, but indirectly through PetroNova Colombia.

Antonio Vincentelli, president and CEO of PetroNova, said , "The Tinigua prospect is one of the largest unexplored prospects in Colombia and the highest impact prospect in PetroNova's portfolio, with best estimate unrisked Prospective Resources of approximately 159 million barrels. This agreement enables PetroNova to develop the Tinigua prospect with minimum additional financial commitments until the commercial phase. We are looking forward to working with such a prominent Colombian oil and gas exploration and production company to determine the potential of the Tinigua prospect."

According to the FOA terms, Pacific Rubiales will pay PetroNova Colombia a cash amount of USD 12.5m for “back-costs” related to the Tinigua contract. The company will carry the cost of drilling, completing, and testing of up to four wells for up to USD 33m to earn a 50 per cent participating interest in the Tinigua contract.

Pacific Rubiales will take on USD 19m of Pacific Rubiales' and PetroNova Colombia's share of the capital and operational costs for the first and second exploratory wells that will be drilled. These costs may amount to USD 12m for the first well and about USD 7m for the second well.

The Tinigua block is around 105,471 gross acres in size and is located in the northern part of the Caguan-Putumayo Basin. Petrotech Engineering Ltd. prepared an assessment report for PetroNova, the Petrotech Report, where the Tinigua prospect was assigned an estimate of approximately 159 million barrels of heavy oil.

PetroNova Colombia has been given an environmental license for the Tinigua block to drill up to twenty exploratory wells from five different platforms along with the permission to install surface facilities required to perform extended testing.

The first well, A3, is expected to be drilled in the second half of 2014.

 

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