Under the terms of the Participation Agreement, Brownstone will be obligated to incur fifty percent of the actual costs to be incurred in the conduct of the work program, which comprised the successful bid submitted by Petrolifera in a recent round of awards made by the government of Rio Negro. The Vaca Mahuida program, as accepted by the tendering government, is anticipated to entail the reprocessing 560 square kilometers of existing 3D seismic; the acquisition of a minimum of 1,150 square kilometers of new 3D seismic over the block; and the drilling of 12 new wells to depths ranging from 1,000 to 1,500 meters, all over a three year period. Upon completion of the work program, and assuming commerciality, a production license of twenty-five years would be issued. Under current arrangements, Petrolifera, the operator would own 75 percent and 25 percent by Brownstone or its nominee.
Based on current market conditions, the approximate cost of the earning program is estimated at $10 million for Brownstone, with a like amount to be incurred by Petrolifera in discharging the block's work obligations. A royalty rate of 23 percent would be payable to the province on any commercial production from the area once commerciality has been declared and production initiated from the region.
Petrolifera as part of its risk management strategy undertook the farmout. The transaction affords Brownstone the opportunity to diversify its resource exposure to a new country and opportunity with an established, successful joint venture operator. The primary objective of the proposed exploration program on the block will be to identify shallow crude oil accumulations, primarily in the Sierras Blancas Formation. Petrolifera had also identified other prospects and objectives prior to its successful acquisition of the block at competitive auction.
Petrolifera Petroleum Limited is a Calgary-based crude oil and natural gas exploration and production company with its primary production base on its Puesto Morales/Rinconada Concession in the Neuquén Basin, Argentina. Significant exploration interests are also held in two licenses onshore Peru and more recently new concessions were secured in the Upper and Middle Magdalena Basin, Colombia. The company's common shares trade on the Toronto Stock Exchange under the symbol PDP.
Brownstone Ventures Inc. is a well-financed Canadian-based, energy focused investment company with direct interests in oil and gas exploration projects, including working interests in approximately 290,000 acres in the Piceance/Uinta Basins of Colorado and Utah and 295 square kilometers in the Assam/Arakan Basin, Northeast India.
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