Gawler has agreed terms to acquire a 25% working interest in the Pompano gas field development and exploration project located in Brazos Block 446L SE/4 in the Gulf of Mexico ('GOM'). The lease holder and operator of the project is a private US company, AnaTexas Offshore Inc ('the Operator').
The acquisition is in line with Gawler's offshore GOM production-development strategy, which commenced in December 2006 with the High Island gas field development. High Island is expected to start production in the final quarter of 2007.
Consistent with the terms and spirit of the previously announced merger proposal between Elixir and Gawler, management of both companies have been involved in undertaking Project due diligence. Elixir is fully supportive of Gawler entering into the Pompano Project.
The Pompano field ceased production in 1995 and has produced 120 billion cubic feet ('BCF') of gas from high quality Miocene reservoirs in a complex faulted structural high trend, which has produced more than 800 BCF of gas from several fields. Like High Island, the field was discovered, explored and, in the case of Pompano, developed with wells based on 2D seismic.
At Pompano a new 3D seismic interpretation by the Operator in 2005 clarified the structure and located undrained reservoir up-dip of producing wells and undrilled fault compartments that were not apparent on the 2D seismic. This has resulted in the defining of substantial Proved and Probable reserves together with the identification of significant exploration potential. Phase 1 of the project (first six wells) will target Proved Undeveloped reserves of 24 BCF, Probable reserves of 40 BCF and exploration potential of 104 BCF recoverable (reserve estimates by the Operator).
Brazos Block 446L SE/4 is located 7 miles offshore in 60 feet of water. It has existing production infrastructure including a platform and two satellite caissons tied back to the platform. The field has pipeline access to gas markets. This infrastructure will significantly reduce early capital cost and time to first production.
The initial drilling program currently envisages the first and second wells to target Proven and Probable reserves while well 3 will target significant exploration potential reserves in deeper sands in an undrilled fault compartment. The first two wells are to be drilled and if successful, produced from existing infrastructure. Drilling of the first well is expected to start before year-end.
Gawler has also announced an agreement with private Houston company Buccaneer Resources Inc for ongoing mutual collaboration on project management, new project identification and local office facilities in Houston. The relationship with Buccaneer was initiated by Gawler's largest shareholder, Aurora Oil & Gas Limited, which has introduced both the High Island and Pompano projects to Gawler. A direct relationship with Buccaneer is considered by Gawler's management to offer valuable ongoing access to new project opportunities and expertise particularly in relation to offshore operations.
Elixir's Managing Director, Russell Langusch, commented: "This is excellent news and underlines the growing relationships that Gawler has rapidly established in the USA. The numerous lower risk development and appraisal opportunities in the Gulf, together with Elixir's high impact North Sea exploration activities represent the foundations for a balanced upstream oil and gas company as proposed by the merger of the two companies."
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