Santa Maria Petroleum Inc. has been informed by Omega Energy Colombia, the operator of Llanos 21 block in the Llanos basin in Colombia, that it has commenced drilling the Calacho No. 1 well. The Calacho well is the first well of a planned two well drilling program on the block.
The Calacho well is being drilled to a planned total depth of 7,000 feet. Drilling of the Calacho well is expected to take approximately 30 days. The Calacho well is programmed to test the hydrocarbon potential of the C7 and Une formations. The gross budget for drilling and testing of the well is approximately $4.5 million.
The Rocamao No. 1 well is the second planned well in the drilling program on the block and is expected to be drilled to a planned total depth of 6,900 feet. Drilling of the Rocamao well is expected to take approximately 30 days. The Rocamao well is also programmed to test the hydrocarbon potential of the C7 and Une formations. The gross budget for drilling and testing the Rocamao well is approximately $5.1 million.
Under the terms of the original farm-in agreement, Santa Maria was to pay 50 percent of the costs of the two wells in exchange for an income production participation of 35 percent. Under a new arrangement agreed to in the spring of 2012, Santa Maria will pay a maximum of $3,875,000 towards the costs of the two wells, of which, $2,000,000 has been paid. Following the completion of the wells and payment of the remaining $1,875,000, Santa Maria will then have the option to: a) waive any right to an income production participation going forward and have no further financial obligations; or b) retain a 24.75% income production participation in the block by reimbursing Omega Energy Colombia for the difference between the costs of the two wells and the amounts already contributed to Omega prior to exercising the option.
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