Enermad Corp. has announced that the parties have now completed execution of all formal documentation to consummate the partnership between the Company and Niko Resources on the Grand Prix Block in Madagascar.
Executed agreements include the Farm out Agreement dated October 20, 2008 and the Joint Operating Agreement dated November 5, 2008. The partnership, including fiscal terms, was previously announced as pending on July 22, 2008. The Malagasy State, through L'Office des Mines Nationales et des Industries Strategiques ("OMNIS"), is fully supportive of the partnership and has approved the transaction by Deed of Assignment dated November 11, 2008. OMNIS is the Malagasy State Agency charged with administration of hydrocarbon and uranium resources.
Under the agreements, the Company has farmed out an interest in its Grand Prix block Production Sharing Agreement with OMNIS effective September 10, 2007 (the "PSC") to Niko through Niko's wholly-owned subsidiary, Niko Resources (Overseas VIII) Limited. The Grand Prix block covers oil and gas prospects in an area of approximately 16,845 square kilometers (4.1 million acres) situated in the Mozambique Channel offshore Madagascar's Morandava Basin on the west coast. It is considered a highly prospective target for potentially large, multi-zone oil and gas prospects.
Niko has committed to fund 100% of the exploration work program over several years to earn a 75% interest in the concession. The Company will have retained a 25% working interest in the concession after the completion of the work program. Thereafter, the parties contribute pro-rata. The work program will begin with a Multibeam Bathymetric survey and a subsequent 3000 sq. km. 3-D marine seismic program, with the remainder of the commitment to be spent on one or more offshore exploration wells depending on depth and cost. In addition, Niko is reimbursing the Company for certain prior expenditures.
Upon completion of Niko's funding commitment, the Company will be left in a very strong financial position, with approximately $7.5 Million in cash and no debt. This will allow the Company to continue its participation in the Grand Prix block while pursuing other potential strategic alliances and exploration opportunities. Going forward, the Company will maintain an active role in the partnership, holding one seat on each of the Management committee and the Technical Committee. In addition, it will continue to maintain offices in Antananarivo with a small staff. Niko has been designated the "Operator" of the partnership by reason of the magnitude of its investment.
As stated previously, Madagascar is just now coming to the world stage as one of very few remaining frontiers where world-class hydrocarbon plays may still be found. Many companies are now preparing to either explore for and/or develop known hydrocarbons both on and offshore, including majors such as Exxon-Mobil.
According to Jim Dalsin, CEO of the Company, "We believe the Grand Prix block is particularly well-positioned to develop Madagascar's offshore oil and gas potential. In addition, we are delighted to have Niko as a partner, as they are one of the most successful international explorers offshore and have a strong Indian Ocean focus, with an extremely positive financial profile. We are looking forward with much excitement to further exploration of the Grand Prix Block in partnership with Niko."
The Grand Prix block covers water depths ranging from the Tidal High-water Mark to 1500+m. The block is located down dip of two reported multi-billion barrel oil deposits, with one currently being developed. The block has multiple play types which will be targeted by the 3-D marine seismic and the drilling program, covering Triassic, Jurassic, Cretaceous and tertiary geologic ages.
There is some evidence to date of salt structure presence and turbidite deposition. 2-D seismic to date has produced numerous leads. The partnership is just completing the reprocessing of 7600+ kilometers of 2-D seismic ranging from older vintage to current data with very good results. An aeromagnetic survey of over 31,000 line km was completed during the summer and the data is now processed.
It is intended that a Multibeam Bathymetric survey will take place midway into 2009, followed by a 3000 square kilometer 3-D seismic program hoped to be completed near year end. This will assist in ranking existing leads into prospects. Drilling will follow as soon as practicable thereafter.
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