Sintezneftegaz Namibia Ltd., the operator, has entered into an Assignment Agreement on behalf of the co-venturers (EnerGulf, PetroSA, NAMCOR, and itself) with ExxonMobil, and Larsen Oil and Gas Ltd., the contractor of the vessel, for use of the drillship Deep Venture to drill the Kunene #1. The Deep Venture is currently under contract to Esso drilling along the coast of West Africa. The co-venturers will accept the rig, pursuant to the terms of the Agreement, when Esso releases the rig from its well location offshore Angola, no earlier than December 23, 2007 and no later than February 15, 2008, or as otherwise agreed by the parties. A deposit to secure the rig has been paid by the operator to Larsen. The costs to drill this well to the targeted total depth of 4,400 meters below sea level, are estimated to be approximately US$50 million and an additional approximate US $9 million, if it is decided by the co-venturers to penetrate deeper objectives, of up to 5,500 meters below sea level. The drilling time is estimated to be approximately 50-60 days. EnerGulf has a 10% interest and is responsible for 10% of the costs. EnerGulf will be reviewing financing alternatives to provide for sufficient capital required for the drilling of the Kunene #1 and to fund other corporate activities.
Block 1711 is situated in the Namibe basin off the northern coast of Namibia along the international boundary with Angola. The two separate exploration prospects, the Kunene and Hartmann, have been identified by extensive modern seismic data on the 893,100 hectare (2.2 million acre) block. Based on a Prospective Resource Assessment provided by Netherland Sewell & Associates, Inc., the co-venturers are targeting a potential multi-billion barrel oil and gas resource on Block 1711.
Commenting for EnerGulf, Chairman of the Board, Jeff Greenblum said, "We are pleased to announce that drilling on Block 1711 is now set to commence. Important pre-drilling work has been ongoing for many months. The re-processing and interpretation of the seismic data has defined and confirmed a number of exploration targets that will be tested by the Kunene #1. Our Agreement with Esso secures a high quality rig whose location in West Africa provides for efficient and economical mobilization to our well site. While EnerGulf is currently well funded, we anticipate securing financing alternatives that provide adequate capital for the drilling of this well and for other corporate purposes and opportunities. We continue to manage our capital structure in a way that provides maximum flexibility to pursue exploration opportunities and maintain minimal dilution. The drilling of this well is an important and highly anticipated event for Namibia and West Africa. Our participation as the only publicly-traded company in Block 1711 affords EnerGulf shareholders a unique opportunity in this world class prospect as we prepare to drill the Kunene #1."
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