Pacific Rubiales Energy Corp. has signed binding letters of agreement with Petrolera Monterrico S.A. Sucursal Colombia ("Petromont") to acquire a 40 percent participating interest and with Canacol Energy Ltd. to acquire operatorship, of the onshore Portofino exploration block in Colombia.
The Portofino block has an area of approximately 404 square miles (1,047 square kilometers), and is located at the north-eastern corner of the Caguan-Putumayo basin in southern Colombia. The block is located within the heavy oil trend that hosts the giant producing fields of Rubiales/Quifa and Castilla/Chichemene, and on trend and adjacent to the developing Capella heavy oil field. The block contains one prospect with a management estimated P50 resource potential of 140 million barrels and up to four additional leads with approximately 160 million barrels.
Ronald Pantin, Chief Executive Officer of the Company, commented: "This is an exciting opportunity and an excellent fit with the Company's expertise in heavy oil development. Pacific Rubiales is already the largest operator and producer of heavy oil in Colombia and has one of the largest net land positions along the heavy oil resource trend. This acquisition adds to the existing portfolio, providing future growth potential to the Company."
The transaction consists of a $23.5 million cash payment to Petromont which includes payment for past exploration costs, plus a $2.2 million carry of their obligations related to an approved exploration work program. As part of the agreement, there is an additional carry obligation to finance certain production facilities and other activities required for the development of the block of up to $45 million. This carry obligation will be recovered from the proceeds of production.
In a separate agreement, the Company will pay Canacol a cash consideration of $3.7 million to assume operatorship of the block. Pacific Rubiales will be transferred operatorship of the block following the drilling of the next four wells.
The transaction is subject to government and regulatory approvals.
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