The Buganviles Block comprises 150,000 acres in the Upper Magdalena Basin in Colombia. Oil was discovered in the Upper Magdalena Basin in the 1950's and in 1957 a producing well (Gualanday-3) tested 800 boe per day of 36 degrees API.
The Delta-1 exploratory well is located "up-dip" of the Gualanday-3 well and is expected to cost US$4,300,000 to drill and complete. Drilling of the Delta-1 exploratory well is expected to commence the first week of December 2007, targeting primarily the Tetuan-Carballos Formation at a depth of 7,600 feet.
The interest in the Association Contract is held in trust for the Corporation and NCT Corporacion Petrolera Latinoamericana, S.L. pending the approval by ECOPETROL S.A. and the National Hydrocarbons Agency of Colombia of the assignment of the interest in the Association Contract. The Corporation and NCT have also entered into an agreement whereby NCT agrees to hold any rights it has in the interest in the Association Contract in trust for the Corporation and further agrees, at the election of the Corporation and for no additional consideration, to transfer and register into the name of the Corporation the interest in the Association Contract or any rights it has in the interest in the Association Contract.
As disclosed, the Corporation has agreed to pay consideration of US$1,500,000 for the assignment of the interest in the Association Contract. The Corporation has paid US$1,125,000 towards the drilling and completing of the Delta-1 exploratory well and will pay US$375,000 when testing of that well commences. If the Delta-1 exploratory well is unsuccessful, the Corporation will not be required to pay the US$375,000 installment.
Pursuant to the Association Contract, ECOPETROL S.A. is entitled to acquire a 30% participation in any producing well by reimbursing 30% of the total costs for such well. If the Delta-1 well is a producing well and ECOPETROL S.A. chooses to participate in such well, the Corporation will be entitled to its portion of the reimbursed costs as they relate to the Delta-1 well.
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