The deal gives Harken access to Los Sauces area, which covers approximately 61,600 acres in Colombia's Central Llanos region. Global already has three contracts--the Alcaravan Association, Rio Verde, and Los Hatos Exploration and Production Concession contracts--in the region.
The Los Sauces Contract is contiguous with the northern boundary of the Rio Verde contract, where Global is currently testing the Tilodiran #2 exploratory wellwith one zone having produced at a natural flow rate of 1,125 bopd plus gas. Los Sauces also is located adjacent to the established, producing Morichal and Tocaria fields that are operated by an international oil company.
Global will own 100 percent of the Los Sauces Contract subject to an initial 10.5-percent royalty. Future production levels will determine the size of the royalty. The contract has a 30-year principal term that comprises an initial six-year exploration phase and a 24-year exploitation and production phase. Under the terms of the agreement, Global must within 12 months reprocess approximately 200 kilometers of existing seismic, acquire and process 50 kilometers of 2D seismic, and drill one exploratory well.
Global can at its election proceed to phase 2, 12 months in duration, and drill one exploratory well. Phases 3 to 6, also all optional and 12 months in length, require the drilling of an exploratory well in each phase.
The Los Sauces area has been subject to prior drilling activity by an international oil company more than 10 years ago, at which time the La Totuma #1 well was drilled with reported oil shows. Based upon the existing formation and seismic data, Global has elected to position and drill an exploratory well geologically updip from the existing La Totuma #1 well in the second half of 2006.
The addition of the Los Sauces Contract brings the total number of contracts Global holds in Colombia to eight.
"Los Sauces, together with drilling at Rio Verde, the Bocachico-Torcaz field recovery CO2 Project and the Bolivar improved recovery methane gas injection project, represent Global's lower-risk 'bridge' projects that are intended to ramp up near-term production and grow cash flow," said Stephen Voss, Global's managing director. "Global proposes to accelerate its activity on the Los Sauces Contract area above the required contract terms as the management team considers the area to offer the potential for relatively predictable drilling with high daily production rates.
"Successful development of the forementioned 'bridge' projects should enable the more rapid execution of Global's opportunities at Caracoli and Luna Llena in Colombia, Block 95 in Peru, and Garachine in Panama," added Voss.
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