Argenta Oil & Gas Inc. has entered into an option agreement for the potential sale of a 50% interest in its Loma El Divisadero Block to an Argentina based private E&P company that operates other oil and gas assets in the Neuquen Basin.
The terms of the option agreement provide for the option holder to invest $3 million to drill the next two development wells on the Company's Loma el Divisadero Block and the option holder will then have the option to purchase a 50% working interest in the Loma el Divisadero Block for a total price of between US$12 million and US $24 million which price will be based on a formula that considers production levels and reserves on the Loma el Divisadero Block after the drilling program is completed.
Daniel Gordon, Vice President, Corporate Development, stated, "This option is a very significant and positive event for Argenta for a number of reasons. First, it establishes a strategic alliance with a powerful local investment group in Argentina and secondly, it provides the Company with additional cash, thus allowing Argenta to close the current private placement and to proceed with the appraisal campaign in Loma El Divisadero/Chorreado Play. The Company will commence acquiring the required drilling equipment immediately so that it can undertake the program within the next few months."
With regard to the private placement financing, Argenta has completed the second and final tranche of the financing and has issued a total of 24,150,000 units at $0.25 per unit for gross proceeds of $6,037,500. This brings the total financing to $9,037,500 when combined with the $3 million option agreement. Each unit comprises one common share and one half common share purchase warrant with each full warrant being exercisable into one common share at $0.35 for a period of 18 months post closing. A finder's fee was paid to certain parties at the discretion of the Company. The securities issued are subject to a four month hold period and the private placement is subject to regulatory approvals.
On the operational side, the LEDO x-2 well is producing under natural flow, with low rates of oil and gas.
"After we installed the pumping unit, we put the well in production, reaching 150 barrels of fluid with 24% of oil. Then, we experienced some mechanical problems caused by the presence of frac sand and gas. When the appraisal campaign is undertaken, we will perform a light workover to solve this problem and increase the oil production rates," said Ricardo Pescara, VP of Engineering and Operations.
The BDCx-1 well completion resulted wet.
Victor Linari, Chief Geophysicist and Geologist with Argenta, said, "The results on BDC x-1 well will orient the future objective for exploration on the western side of the block where, besides the Chorreado discovery, there are deeper and more shallow targets that merit future investigation. Specifically for the Chorreado Sands, after reviewing the seismic information, including the new wells drilled in this area, we were able to identify a potentially thicker and more permeable area in the same field that is north of LEDO x-2 well and below the tested oil-gas contact. We are looking forward to drilling two to three appraisal wells in this reservoir soon."
Regarding Argenta's other blocks in Argentina, the Company has finished shooting 450 km2 of 3D seismic on the Covunco and El Corte Blocks and is currently evaluating the data to identify drillable prospects within the next couple of months.
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