As announced by the Company on 16th August 2010, Enegi via its wholly owned subsidiary PDIProduction Inc. (PDIP) entered into a farm-out agreement with Dragon Lance Management Corporation (DLMC) with respect to development of the deep rights in EL1070 (EL1070 Farm-Out Agreement).
Further to the announcement by the Company on 6 December 2011, Enegi is pleased to announce that it has received confirmation from DLMC that it, and its investors, remain fully committed to the EL1070 Farm-Out Agreement and are currently waiting on drilling operations on the 3K-39 well to be completed and on the results of the subsequent application for a Significant Discovery Licence over the EL1070 area.
Under the EL1070 Farm-Out Agreement DLMC are obliged to:
· commence a seismic programme on or before 30th September 2012, provided that required environmental approvals have been received; and
· select a drill site and spud a new well on or before 30th September 2013 to test the Shoal Point lead, subject to rig availability, environmental approval, surface accessibility and receipt of all regulatory approvals.
Shoal Point is the largest mapped lead in PDIP's acreage. All costs associated with the seismic programme and the new well will be paid for by DLMC, following which DLMC will earn a 70% interest in the deep rights in EL1070.
The Board of the Company believes that this work program could bring upwards of C$20 million investment into the 100% owned deep zone of EL1070 area. This will greatly enhance shareholder value and reduce concentration risk by securing activity in multiple locations across the Company's acreage in Western Newfoundland, whilst also improving the insight and economics on the Green Point Shale on Enegi's acreage.
Steve McIntosh, CEO of DLMC commented:
"We are pleased to see operations on the 3K-39 well moving forward with the evaluation and testing phase of operations. Our investors are looking forward to harvesting the potential of the "Deep EL-1070" area and remain fully committed to meeting our obligations under the farm-out agreement with PDIP."
Alan Minty, CEO of Enegi Oil Plc., added:
"We look forward to SPE applying for an SDL over the EL1070 area following the drilling of the 3K-39 Well, results of which will remove the current uncertainty surrounding exploration rights over the EL1070 area. Also it will improve our understanding of the opportunity presented by having the Green Point Shale on our acreage. We are pleased that DLMC remain fully committed to the EL1070 Farm-Out Agreement which allows the Company to retain a stake in the significant Shoal Point lead without the risks and substantial expenses associated with development."
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