Addax Petroleum Corporation has acquired a 33.33% interest in the Sangaw North Production Sharing Contract ("PSC"). The Sangaw North license area is operated by Sterling Energy plc and is located approximately 80 kilometers southeast of the Corporation's Taq Taq field.
Commenting today, Addax Petroleum's President and Chief Executive Officer, Jean Claude Gandur, said, "We are pleased to expand our activities in the Kurdistan Region of Iraq to include the highly prospective Sangaw North license area. Given our successful drilling campaign at Taq Taq, we intend to assist our partner to expedite exploration drilling. We believe that exploration success at Sangaw North would offer attractive synergies with the development of Taq Taq for the benefit of all the people of Iraq and our shareholders."
The Sangaw North PSC covers a gross area of approximately 121,600 acres (492 km2). Petroleum exploration activity to date includes field studies and the acquisition of 310 km of 2D seismic which is expected to be completed in November of this year. The Sangaw North license area contains a large surface anticline, a number of surface oil seeps and the operator is targeting to spud an exploration well in mid-2009.
The Sangaw North PSC is subject to an assignment to the Korean National Oil Corporation which, when completed, will reduce the Corporation's interest to 26.67%. In addition, the Kurdistan Regional Government has the right to require that at a future date a government nominated entity is assigned 25% which, if exercised, will further reduce the Corporation's interest to 20%.
Under the terms of the acquisition, the consideration from Addax Petroleum comprises the reimbursement of Sterling's past costs as well as funding the seismic campaign and the drilling of the first exploration well. This reimbursement is funded from the Corporation's existing financing facilities and the future costs will be included in the Corporation's 2009 capital budget which is expected to be funded entirely from the Corporation's funds flow from operations. The Corporation continues to have substantial funding capacity within its existing financing facilities.
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