Fusion Oil & Gas has signed agreements with various subsidiaries of Amerada Hess Corporation whereby, subject to the normal approval of the respective Government Ministries, Amerada Hess will acquire an interest in Fusion's Gambia PPL, AGC (Senegal/Guinea-Bissau) Croix du Sud and Cameroon Ntem deepwater exploration licenses. The three licenses involved in this agreement cover a combined area of approximately 11,100 square kilometers of the highly prospective deepwater West African Atlantic Margin.
The main elements of the agreement are as follows:
- Amerada Hess will be appointed as Operator of each license.
- Amerada Hess will acquire 80% of the Gambia PPL license, 68% of the Croix du Sud license and 80% of the Ntem license.
- Amerada Hess will fund all costs related to the acquisition and processing of an aggregate 4,250 square kilometers of 3D seismic data across the three exploration licenses, in addition to certain costs that relate to 2D seismic surveys previously acquired in the licenses by Fusion. 3D seismic tender documents have been issued with a view to commencing acquisition at the earliest possible opportunity.
- Amerada Hess may elect to fund all costs associated with the drilling of up to six deepwater exploration wells (up to two wells on each of the three licenses).
- Expenditure on this anticipated exploration program is estimated to be worth in the region of US $22 -US $33 million net to Fusionís remaining 20% interest in the three licenses.
- Fusion will retain a 20% participating interest in each license and has the right to re-acquire a further 5% working interest in each license prior to drilling the first exploration well through payment of pro-rata back costs.
After evaluation of the 3D seismic data Amerada Hess will have the option to fund the first exploration well on each license or to withdraw from the respective license. On completion of the first exploration well on any license Amerada Hess will have the option to fund a second exploration well or to withdraw from the license.
Once Amerada Hess have drilled a second exploration well on any license, it's farmin obligations regarding that license will have been fulfilled. Should Amerada Hess withdraw from any license before that stage, Fusion would return to its pre-farmout equity position.
The extent of the Fusion 20% carry through the drilling operations will be capped at net US $4.5 million for each of the wells in The Gambia and AGC and net US $3 million in Cameroon. Amerada Hess will fund all operating and permit costs in each license until it either completes the second well or elects to withdraw from the relevant license.