Petrobank Acquires Colombian Interests
Petrobank Energy and Resources Ltd. has signed an agreement to acquire all the outstanding shares of AEC Colombia Ltd., which holds interests in two incremental production contracts and three exploration contracts in the Putumayo and Upper Magdalena basins of Colombia through the assumption of the remaining work commitments. This agreement is subject to regulatory and government approvals and is expected to close on April 30, 2002.
In the Putumayo basin, the Company is acquiring rights to three exploration blocks as well as the Orito field incremental production contract. In the Orito block, Petrobank will be entitled to develop and receive production in excess of a predefined baseline production volume. Incremental production will initially be split between Petrobank (79%) and the Colombian state oil company, Ecopetrol (21%). Current daily production from the field is approximately 3,700 barrels of light 32 degree API crude oil. Since inception, the field has produced 220 million barrels with original oil in place currently estimated to be in excess of 1.1 billion barrels. The remaining US$5.0 million commitment on the block is to be satisfied by drilling two wells during the initial work program with the option to proceed to a complementary development stage during which Petrobank would invest an additional US$27.0 million. Petrobank is in the process of presenting a development plan to Ecopetrol to drill up to three new wells in the field by the end of 2002. Ecopetrol is responsible for maintaining its base production curve and operates all the production in the field on behalf of Petrobank.
In addition to the Orito block, the Company has acquired three exploration blocks in the Putumayo basin. Petrobank earns its interest on these blocks by completing an initial work plan that includes shooting seismic and/or drilling exploratory wells. The remaining exploration commitments total approximately US$8.5 million, which we anticipate will be satisfied over the next three years. In 2002, we plan to reprocess seismic data at an estimated cost of US$0.3 million.
The Neiva block in the Upper Magdalena basin is subject to an incremental production contract similar to the Orito contract, except that Petrobank's initial participation factor is 69% of incremental production. The field is currently producing approximately 4,000 barrels of oil per day from 60 wells. The Neiva field has produced 51 million barrels since inception with original oil in place estimated to be greater than 210 million barrels. Remaining work commitments on this block are approximately US$11.0 million. Petrobank plans to spend US$1.0 to 2.0 million on Neiva in 2002, initially on well recompletions.
The experience that Petrobank's management team gained at Pacalta Resources Ltd. during the late 1990s in both the Putumayo basin of Colombia and the adjoining Oriente basin of Ecuador positions the Company to quickly capitalize on these new opportunities. Petrobank President John D. Wright stated, "It's a pleasure to see these assets and opportunities come full circle. When we first negotiated certain of these contracts with Pacalta, it was our intent to pursue look-alike prospects in the Putumayo basin, based on our successful exploration and development efforts in Ecuador. With the addition of the Orito and Neiva fields, Petrobank now has an opportunity to bring Canadian exploitation and exploration know-how to two well-defined, world-class oil reservoirs. We hope to develop a significant production base from these existing fields which will underpin our continued growth in Colombia."
Petrobank's un-drawn credit facility has been recently increased to $40.0 million, which, when combined with our existing cash balance of $25 million, provides the Company with financial resources totaling $65.0 million. These opportunities in Colombia represent two potentially high growth exploitation projects on which a portion of this capital will be deployed. Over the long term, we will continue to enhance our Western Canadian asset base, providing cash flow and financial stability that will enable us to execute high impact projects internationally. Outside of the Western Canadian Sedimentary basin, Petrobank's main areas of focus are in South America, North Africa and the Middle East.