Petroamerica Oil is withdrawing from the Eastern Cordillera blocks, COR-12 and COR-14, in Colombia. This divestment reflects part of an ongoing portfolio restructuring plan by the Company to focus on its lower to medium risk exploration properties, and on the Llanos Basin in particular.
The Company entered into a farmout agreement for the subject blocks with Green Power Corporation S.A. Colombia ("Green Power") and Petrolera Monterrico S.A. Colombia, through Imore S.A., which later on became Petroamerica. The original farmout terms required Petroamerica to carry 100% of the first exploration phase commitments for seismic and drilling up to a cap of US $18,547,620 to earn a 50% participating interest in both blocks.
By way of consideration for the withdrawal, the Company will surrender to Green Power guarantees of US $2,300,000 and will pay an additional sum of US $5,500,000 to Green Power. The cost of withdrawing from these blocks is significantly less than the potential exposure the Company could face to execute the required work programs. Furthermore, the Company's senior management does not see the cost and risk profile of these blocks as being a particularly good fit with the Company's present size and strategy.
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