Petro Vista has agreed to farm-in to and acquire a 37.5% working interest (27.23% net revenue interest) in the shallow offshore and producing oil concession Block SES-107D ("Tartaruga Block") located in Brazil.
The Tartaruga Block is located in Brazil's prolific Sergipe-Alagoas Basin, northeastern Brazil and currently produces approximately 90 boe/d from one zone in one well which has been on production for over 12 years. This well has multiple pay zones identified on logs that have not yet produced. Based on results of historic production, the existing well rate is anticipated to be increased up to 300-400 boe/d with a planned work-over in November, 2009. Once this work over is completed, Petro Vista will fund the drilling of a side track development well located up dip of the existing producing well targeting the same proven structure.
Pursuant to the terms of a Head Farm-Out Agreement dated October 15th 2009 ("Agreement") Petro Vista will acquire a 37.5% working interest (27.23 % net revenue interest) in the Tartaruga Block from UP Petroleo Brasil Ltda., by paying 100% of the costs of drilling and completing a sidetrack development well on the Tartaruga Block (the "New Well") to a maximum cost to Petro Vista of US $5,595,771 and subject to Petro Vista being able to recover any expenditures over US $4,000,000 from approximately 40.8% of initial gross production from this sidetrack well. Any expenditure over US $5,595,771 will be paid on a "head's up" basis with Petro Vista obligated for its 37.5% working interest. Petro Vista has transferred to UP Petroleo Brasil Ltda. US $4,000,000 as an initial contribution of the New Well costs at which point, Petro Vista became entitled to a 27.23% net revenue interest in production from the Block.
The acquisition is subject to receipt of the approval of the Tartaruga Block's consortium members, which consist of UP Petroleo Brasil Ltda., TDC do Brasil Petroleo Ltda. and Petrobras Brasilia S.A.; approval from the Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis ("ANP") to the assignment of the working interest to Petro Vista's wholly-owned subsidiary Petro Vista Petroleo do Brasil Ltda. and all other necessary regulatory approvals including the acceptance of the TSX Venture Exchange.
Read Taylor, President and CEO, commented, "We are pleased to have now added this producing asset and exploitation opportunity to our portfolio. We identified this asset early on for its high potential and near term production. With our recent funding we now have the ability to get on with our work program and build shareholder value with this first producing asset. This acquisition provides us with production and initial cash flow having the potential to increase significantly following the work over of the existing well and drilling of the new side track well. This block also has additional exploration upside within a series of deep sands which produce in nearby fields."
Planned Work Program
A work over of the existing producing well is planned for November 2009. This work over is designed to maximize production from this well and will take approximately 14 days to complete. During this time the sidetrack well bore (7-TTG-1DP-SES) will be prepared for drilling the new development well in December 2009. It is hoped that the work over will increase production from the well from current levels of around 90 boe/d to between 350 and 400 boe/d.
Drilling of the development well is estimated to take 45 days and is expected to commence January 2010. The well is expected to be drilled to a depth of -3794m MD and intersect 13 of the previously logged Penedo Sands. This deviated well will be drilled off of the current pad which can accommodate up to 4 new wells.
Following the work over and drilling the new development well both wells will both be put immediately on production. The crude oil is light high quality 41 API. All facilities are in place including drilling permit, tank batteries, separators, etc. An oil sales contract with Petrobras exists. The crude oil is currently trucked to a nearby refinery. Once production rates are established a lateral pipeline into the nearby main line within 5 km of the Tartaruga Block can be constructed.
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