Valeura Energy Inc. (the "Corporation") has been notified by Aladdin Middle East Ltd. ("AME") that AME's Rubai exploration licenses Nos. 2759, 2598, 2599, 2600 and 2601 (the "Rubai Licenses") in southeast Turkey have been cancelled by the General Directorate of Petroleum Affairs of the Republic of Turkey ("GDPA"), for a failure to meet the district timing requirements for drilling.
Valeura has confirmed that the cancellation notification appeared in Turkey's Official Gazette on May 7, 2011. The cancellation order was signed by the Minister of Energy and Natural Resources as of April 26, 2011, but Valeura had not been notified or provided with a copy of the order.
This development affects Valeura since the Rubai Licenses were part of the farm-in lands associated with the AME and Guney Yildizi Petrol Uretim Sondaj, Muteahhitlik ve Ticaret A.S. ("GYP") ("AME-GYP") farm-in. As announced on April 28, 2011, the Bostanci-1 well (50% funded by Valeura) was spudded on April 24, 2011 on License 2600 aimed at fulfilling the district drilling requirement on the Rubai Licenses.
To date, the Corporation has invested approximately US$7.9 million toward the minimum Phase I earning requirement of US$8.8 million under the AME-GYP farm-in. Of this amount, US$2.7 million was directed to the Rubai Licenses. The Bostanci-1 exploration well had been undergoing pre-drilling work in March and April and Valeura had advanced US$1.525 million, representing its 50% share, to initiate drilling. The well was spudded on April 24, 2011, which Valeura and its partners judged would be acceptable. As a result of the latest developments, drilling has been suspended and the well is in the process of being temporarily abandoned.
Valeura will be meeting with partners and the GDPA in the coming days to develop next steps. Valeura's intention would be to re-apply for one or more of the Rubai Licenses. There can be no assurance that such an application would be successful and timing of any potential award is uncertain.
Other lands under the AME-GYP farm-in at Kahta and Karakilise should not be affected by these events, and all earning expenditures under the AME-GYP farm-in, regardless of where these expenditures are made on the farm-in lands, are credited to the earning account.
Valeura is a Canada-based public company currently engaged in the exploration, development and production of petroleum and natural gas in Turkey and Western Canada.
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