The Dutch Mining Council has recommended the award of a Production License for the M1a block to Cirrus. Formal ministerial approval and award of the production license is expected by June 2007. The production license award is also expected to provide for participation in the M1-A field development by the Dutch State through Energie Beheer Nederland B.V ("EBN"). Once the production license is awarded and EBN becomes a 50% working interest partner in the M1-A development, EBN will reimburse past costs related to the M1-A field which are estimated to be $27 million (pre-tax) net to Cirrus.
Partners have approved an interim development budget to proceed with engineering design work prior to production license award to maintain the project schedule. This engineering work will also establish an accurate estimate of the expected development costs, preliminary estimates of which are higher than previously expected. Approval of the full development plan and budget is contingent upon finalization of commercial terms for access to third party infrastructure.
Partners have approved an interim development budget to proceed with engineering and design work and to establish an accurate estimate of the expected development costs. Approval of the full development plan and budget is contingent upon finalization of commercial terms for access to third party infrastructure.
Drilling Rig Availability
Cirrus has been offered a firm rig slot with the jack-up rig Noble Lynda Bossler for re-entry and completion of the M1-A and M7-A development wells during the third quarter of 2008 and discussions to contract the rig are underway. Having access to a rig in this timeframe provides for the timely completion of both projects and meeting the first gas target of fourth quarter of 2008.
Cirrus Energy Corporation has executed an Engagement Letter with the Royal Bank of Scotland ("RBS") in contemplation of securing a loan facility for the financing of the M1-A and M7-A developments. This is expected to lead to a fully termed loan agreement subject to normal conditions precedent usual in such agreements.
David Taylor, Cirrus' Chief Executive Officer, comments:
"Material progress has been made on a number of fronts with respect to moving forward with both the M1-A and M7-A field developments and to maintaining our initial targets for planned commencement of production. We are delighted with the support we have received from the Dutch authorities who share our enthusiasm with respect to bringing gas from these fields to market and for the financial support offered by RBS who we view as a strategic long term financial partner of choice for companies such as Cirrus."
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