Golden Gate Petroleum has reached a settlement with BNP Corporation to drill the Manzano prospect. Manzano is one of the largest prospects identified in the Padre Island Joint Venture area, and the agreement reached with BNP paves the way for this large prospect to be drilled in the most cost-effective manner, which is substantially below the original budget estimate.
Under the settlement agreement, BNP will drill the Manzano well to a depth of 10,500ft (vertical depth) for a turnkey fee of US$4,500,000. GGP has a 35% interest in this section of the well that contains the shallow targets. If no commercial hydrocarbons are encountered above 10,500ft the PIJV will deepen the well to approximately 15,100ft (vertical depth) to test the deeper target. Where commercial hydrocarbons are encountered in the shallow section, the well will be completed in these shallow zones and produced from. Under the settlement agreement with BNP the well will need to be handed over to the PIJV at least 6 months prior to expiry of the leases (which is presently October 2008 but may be extended where a pooled unit is completed).
The Manzano Deep Structure is considered to be a world class exploration prospect with gross P50 reserve potential estimated to be around 337 Billion Cubic Feet of gas (“BCF”) and an upside P10 potential of 816 BCF. Golden Gate has a 37.5% working interest in the deep structure and will operate the well below 10,500ft. The well is expected to commence drilling in January 2008 and take approximately 25 days to reach total intermediate depth of 10,500 ft.
Deepening of the well to TD at 15,100ft is expected to take a further 45 days. As mentioned previously the deepening operation could commence as early as late February but the time of deepening is dependent on the results obtained in the interval to 10,500ft. If the well is completed in the shallow target and a temporary pooled unit is formed (temporary pooled units are normally for eighteen months) production will continue for 12 months at which point production will be suspended and the well deepened. If a temporary pooled unit is not granted, deepening will commence no later than October 2008.
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