Under the agreement and subject to certain conditions precedent, WPN would acquire a 48.75% interest in reservoirs below the main Petisovci oil reservoir commencing at a depth of approximately 2,000 metres (the "Deeper Reservoirs"), all located in the Petisovci-Dolina field area of Slovenia. The Agreement is subject to WPN retaining a third party consulting firm to undertake a full technical review of the Deeper Reservoirs and to WPN demonstrating by April 25th, 2004 that it has at least Euro 4.2 million (approximately Cdn $ 7.1 million) available to spend on evaluating the Deeper Reservoirs underlying the Petisovci-Dolina field.
Based on the technical analysis to date, it has been agreed that the work will consist of performing at least 4 fracture stimulations on existing deep wells or such other equivalent work as may be agreed and recommended pursuant to the Tory-Ikoda report and mutually agreed by all parties to the agreement.
The existing deep wells were drilled in the mid to late 1980's and have produced approximately 9 Bcf from certain zones within the Deeper Reservoirs. Currently only minor gas volumes are produced from a few of these wells. The Deeper Reservoirs contain multiple sand reservoirs, believed to have potential for gas production, which have not been stimulated or produced to date.
WPN has retained Troy-Ikoda Limited to conduct the technical review of the Deeper Reservoirs and the past fracturing program. Troy-Ikoda, based in the United Kingdom, is one of Europe's largest fully independent oil and gas consulting companies. The review is expected to be completed in May 2004. Upon completion of both the technical review and the stimulation program described above, WPN will have earned their interest in the project and Loon will retain a 9.1875% interest in the Deeper Reservoirs and a 26.25% interest in all other zones.
The Petisovsci and Dolina fields lie on a large anticlinal structure which continues east into Hungary. Approximately 1/3 of the structure is in Slovenia with the balance in Hungary. The oil field on the Hungarian side of the border, the Lovaszi field, has produced 50 million barrels and 230 Bcf of gas while the Petisovsci-Dolina field area has produced 5.6 million barrels of oil and 34.3 Bcf of gas, less than 15% of the volumes produced at Lovaszi. The Company believes that significantly more oil and gas can be produced from the Slovenian part of the structure.
Slovenia is located in south-central Europe and is bounded by Croatia (south), Hungary (east), Austria (north) and Italy (west). The project area is located in eastern Slovenia near to the borders with Hungary and Croatia approximately 210 kilometers south of Vienna, Austria and 180 kilometers northeast of Ljubljana, the capital of Slovenia. Slovenia will be joining the European Union (the "EU") in May of this year.
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