In order to achieve its strategic vision of finding and delineating the vast oil potential of Puntland, the Company has sought the assistance of a Joint Venture partner with the technical and financial capability to undertake this task. Range believes that Canmex meets these criteria, and, combined with its strong understanding of Northern Somalia and Yemen, will be successful explorers and operators.
Canmex is a subsidiary of Canmex Minerals Corporation a Vancouver based company listed on the Toronoto Stock Exchange. . The Board and management of Canmex have been involved in exploration, development and production operations in a number of the major oil and gas provinces of the world including the Middle East, Papua New Guinea, Malaysia, Vietnam, United Kingdom, Libya, Sudan, Albania, Somalia and Russia. Canmex have demonstrated to the Board that they have the financial capability and a strong technical team to undertake the exploration and operator functions.
Heading up Canmex's exploration effort in Puntland will be Rick Schmitt. Rick is a Petroleum Geologist with 29 years of diverse international experience in most of the world's major petroleum provinces. His expertise includes exploration, exploitation, operations and new ventures as well as strategic planning and negotiations. Of particular relevance, Rick has worked extensively in the Horn of Africa and Yemen. Prior to joining Canmex he lived in Yemen for five years as President and General Manager of a major international oil company's Yemen operations. He had previously held senior positions with Nexen, notably as Vice President and General Manager of Australia/Indonesia and General Manager of International Exploration and Production. Rick is a UK graduate in Geological Sciences and is a Member of the American Association of Petroleum Geologists and the Canadian Society of Exploration Geophysicists. His knowledge and experience of the Yemen oilfields will be invaluable in exploring the Puntland basins which are seen as analogous to the Yemen Basins. The Company looks forward to working with him and his group towards creating exploration and drilling success in Puntland.
Key Terms of the MOU
Main conditions precedent of all necessary regulatory approvals (see Puntland Government and TFG sign off referred to below), final due diligence and formal documentation (a production sharing agreement between the Puntland Government, Range and Canmex is expected to be finalized in the next 4 weeks). Targeted completion date is November 15th with a drop dead date of December 31, 2006;
Canmex will be the Operator of the on shore oil and gas exploration effort with an obligation to spend US$50m to earn an 80% interest in the two main basin areas in Puntland (the Nogal and Darin Basins). The US$50m includes a minimum of 4 exploration wells to be completed (2 in each basin), a sign on bonus to be confirmed upon finalization. There is a further US$3.5m payment upon commercial production. Range free carried until exploration moneys spent;
Of the Canmex 80% farm in right, 20% (in one or both basins) is available to farm out to third parties on terms to be agreed between Range and Canmex. Any sign on bonuses with third parties will be split 60% Range , 40% Canmex.
Both the Puntland Government and the Transitional Federal Government of Somalia have provided Range and Canmex with their absolute support of the MOU, which is reinforced in official letters sent to both Companies;
"The Puntland Government is extremely encouraged by the continued exploration and development that Range is bringing to our state and the proposed farm in with Canmex is obviously another significant step forward. With over US$45m committed over the next few years, the Government believes that Range and Canmex have put together a partnership that will unlock the considerable hydrocarbon potential of Puntland and deliver the returns to all key stakeholders working together to bring Puntland back on to the African stage…. the Puntland Government has reviewed the proposed commercial terms of the farm in joint venture with Canmex Minerals Corporation and in principle supports and approves all key aspects of the transaction." Mohamud Hersi – President of Puntland State of Somalia.
"The Transitional Federal Government of Somalia in principle supports and fully endorses the activities of Range Resources Limited and Canmex Minerals Corporation. Further, the TFG acknowledges and agrees with the key terms of Range's Contract of Works and the Range/Canmex PSA agreement will be recognized and upheld within any national framework of mining petroleum legislation enacted as part of the Somali Unification Process which the TFG is involved in."
Abdullahi Yusuf Ahmed – President of the Transitional Federal Government of Somalia.
The Company looks forward to finalizing the Canmex Partnership and unlocking the significant hydrocarbon potential of Puntland.
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