Eaglewood Energy Inc. announced that it has executed a farmout agreement with Ketu Petroleum Ltd, a wholly owned subsidiary of Horizon Oil Ltd (Horizon) for 20 percent of Eaglewood's 65 percent participating interest in Petroleum Prospecting License (PPL) 259 in the Western Province of Papua New Guinea (PNG). On completion of the transaction, Eaglewood will continue to own a 45 percent participating interest in PPL 259 and retain operatorship.
Horizon currently has a 25 percent participating interest in PPL 259 which, after completion of the farmout, will be increased to 45 percent. Further, upon completion of Horizon's sale to Osaka Gas of 40 percent of its PNG interests (announced in May 2013) its participating interest in PPL 259 will be reduced to 35 percent. Accordingly, on completion of the farmout announced today and the Osaka Gas deal, the equity interests in PPL 259 will be Eaglewood 45 percent (operator), Horizon 35 percent, Osaka Gas 10 percent and Mega Fortune International 10 percent. Horizon is also the operator of Petroleum Retention License (PRL) 4 which contains the Stanley discovery adjacent to PPL 259 and PRL 21 (which contains the Elevala, Ketu and Tingu discoveries) adjacent to the Ubuntu-1 gas condensate discovery in PRL-28, in which Eaglewood has a 40 percent participating interest and is operator.
To earn the additional 20 percent participating interest in PPL 259, Horizon will be required to pay to Eaglewood approximately $3.75 million for Eaglewood's sunk costs, and in addition to Horizon funding its 35 percent participating interest, it will be required to pay $5 million of Eaglewood's expenses for the next PPL 259 well.
It is currently expected that the next PPL 259 exploration well will spud during the first half of 2014, although the exact timing of the well is yet to be finalized with Horizon and the other PPL 259 participants.
The completion of the farmout transaction is conditional upon receipt of regulatory approvals and certain other customary conditions.
CEO Brad Hurtubise commented, "We are very pleased, upon closing of this farmout transaction, to be fully funded to drill our next well in PPL 259 and have some incremental capital to help finance our participation in the Stanley development or secure additional seismic to identify our next drilling location. We are also pleased to be furthering our relationship with a knowledgeable and experienced partner like Horizon, who will be operating the next well. We expect, subject to rig availability, the well will spud in the first half of next year."
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