Global will own 100% of the contract subject only to an additional 10.5% percent royalty, this payment being divided between the Colombian Ministry of Energy and others. The size of the royalty payable to the Colombian Ministry of Energy is determined by future production levels. The contract duration is approximately six years for the exploration phase and 24 years for the exploitation phase. Terms of the contract require Global during Phase 1 to equip for production two existing wells located on the Rio Verde acreage, the Tilodiran #1 and the Macarenas #1. These wells, drilled in 1986 and 1993 respectively, tested productive.
The Tilodiran #1 was drill stem tested at a rate of 258 barrels in five hours of 18 degree to 23 degree API gravity oil. The Macarenas #1 was drill stem tested at a rate of 320 barrels per day of 33 degree API gravity oil. Also during Phase 1 of the contract, Global is required to reprocess 300 kilometers of existing seismic and acquire 50 kilometers of new 2D seismic. The time period for Phase 1 is 20 months.
If Global elects to enter Phase 2 of the contract, the company must drill one exploration well and acquire a further 25 kilometers of 2D seismic. Phases 3, 4 and 5, also optional, require one exploratory well to be drilled per phase. Phases 2, 3, 4 and 5 have a time period of 12 months each.
Commenting on the Rio Verde contract, Stephen C. Voss, Managing Director for Global Energy Development PLC, said, "We are very pleased that Global is one of the first companies to sign a new contract with the newly formed state-owned National Hydrocarbons Agency. This new contract provides the company with further reserves, near-term production growth opportunities and significant upside exploration potential in an area in which we have many years of operating experience.
"The recompletions of the Tilodiran #1 and the Macarenas #1 are of special interest and will be the focus of our initial efforts during the remainder of 2004. We hope to install subsurface pumps and surface processing equipment for both wells and bring them on production as soon as operationally possible. In addition, we are excited about additional development around the Tilodiran #1 and Macarenas #1 wells and the exploration opportunities located on the remaining Rio Verde contract acreage."
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