Nido was awarded SC 54 last August and acquired a 100-percent working interest with the intention of farming out part of its interest to manage its risk. In undertaking its initial evaluation of the SC 54 contract area, Nido recognised as good oilfield practice the advantage of acquiring additional seismic data in order to mature existing prospects and leads prior to the commencement of the drilling program.
According to Nido, Yilgarn's offer to farm in to SC 54 is attractive because it incorporates both a seismic and a well program. Yilgarn will earn a total 40 percent working interest in the SC 54 contract area upon the completion of two stages.
In the first stage, Yilgarn will fund the acquisition and processing of seismic data on a 4:3 promote basis. This is based on estimated costs of US$6 million for the seismic program. Following the technical evaluation of the seismic data, Yilgarn is required to fund the drilling of a well on a 2:1 promote basis as the second stage to earn its 40-percent working interest. This is based on estimated costs of US$15 million for the well.
The farm-in offer is conditional upon Yilgarn obtaining financing for the seismic program, relevant approvals, conducting a due diligence, and executing a formal farm-in agreement with Nido.
"This is a very successful outcome for Nido," said David Whitby, the company's managing director. "In real terms, Nido will retain a 60-percent working interest in SC 54 and limit its exposure to around 27 percent of the estimated capital costs for the seismic program and the well. Nido will also retain operatorship over the area."
SC 54 comprises approximately 500,000 hectares and is contiguous to Nido’s other Philippine acreage. It offers conventional plays targeting Nido Limestone reservoirs and also provides access to the highly prospective Miocene turbidite play fairway.
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