Pacific Asia Petroleum, Inc. has entered into an Agreement on Cooperation with Well Lead Group Limited relating to the possible acquisition of a participating interest in two onshore producing areas in the People's Republic of China.
Pursuant to the Agreement on Cooperation, Pacific Asia Petroleum, Inc. and Well Lead Group Limited agree to use commercially reasonable efforts to finalize and enter into a final Sale and Purchase Agreement (before the end of November, 2008) with respect to the purchase by Pacific Asia of up to a 39% interest ("Interest") held by Well Lead in Northeast Oil (China) Development Ltd.'s 95% interest in the currently producing oilfield blocks Fu710 and Meilisi723 located in the Fulaerjiqu Oilfield in Qiqihar City, the Heilongjiang Province in the People's Republic of China.
Frank C. Ingriselli, President & CEO of Pacific Asia, said, "We are excited about this opportunity to implement Pacific Asia's plans to expand on our onshore oil production opportunities in China. The current partners have drilled over 20 wells in the fields with steadily increasing production. We believe that our Pacific Asia operational team will complement our partners by bringing their experiences and technical recommendations on how to maximize economic production. While we still need to complete our due diligence, we believe that this opportunity has the potential to jump-start our strategy of adding currently producing fields to our portfolio."
According to current plans, the parties intend to continue to drill production wells over the next few years in order to maximize commercial production from the blocks. The two blocks have a total area of approximately 34 square kilometers. The estimated oil reserves in the field have been certified by the Chinese government; production licenses have been issued and an independent report has been publicly published with a present value of approximately US $230 million for the 51% owner. The oil sharing contract covering these areas has a term that expires in May 2027.
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