Pacific Rubiales Successfully Farms-Out Blocks in Colombia, Peru


Llanos Basin, Colombia
(Click to Enlarge)

Pacific Rubiales has successfully completed a private competitive bid process for the farming out of a series of blocks in which it holds interests in Colombia and Peru, resulting in the award by the company of working interests in such blocks to third party bidders. The total amount successfully farmed out by the company will result in a US $54.2 million reduction in its exploratory commitments for the next two years, most of which is to be achieved from the farming out of two of the company's interests in Peru. In all cases the company has retained operatorship of the blocks.

The farm-out process will allow the company to continue concentrating its investments on core assets without losing the potential upside from promising exploratory activities, while also sharing part of the risk of such activities. The company plans to complete the assignment of the various participating interests awarded under the process as soon as possible.

The following is a summary of the results of the process:

Colombian Blocks:

CPO-1 Block: Located in the Llanos Basin. The company has awarded 50% of its working interest in the block to Petroamerica Oil Corp., a Calgary-based oil & gas company, in exchange for Petroamerica providing 100% of the total investment required to complete the first phase of the minimum exploratory program (MEP) for the block, equal to US $6.9 million. The 36 month-long first exploration phase of the MEP requires a minimum investment of US $9.6 million, which will be spent on the acquisition of 200 km of 2D seismic, the drilling of one exploratory well and geological and geophysical studies. The company will retain a 50% working interest in the block.

Tacacho Block: Located in the Putumayo Basin. The company has awarded 49.5% of its working interest to Petrodorado Ltd, a Calgary-based oil & gas company, in exchange for Petrodorado providing 100% of the total investment required to complete the first phase of the MEP for the block, equal to US $8.0 million. The 24 month-long first exploration phase of the MEP requires a minimum investment of US $8.0 million, which will be spent on the acquisition, processing and interpretation of 480 km of 2D seismic. The company will retain a 50.5% working interest in the block.

Moriche Block (Mauritia East Prospect): Located in the Llanos Basin. The company has awarded 49.5% of its working interest in the "Mauritia East Prospect" to Petrodorado in exchange for Petrodorado providing 100% of the total investment for the current exploratory phase for the block, equal to US $5.53 million. This exploration phase requires a minimum investment of US $6.5 million, which will be spent on the drilling of one exploratory well. The company will retain a 35.5% working interest in the Mauritia East Prospect and an 85% working interest in the rest of the block.

Buganviles Block (future exploratory programs): Located in the Upper Magdalena Basin. The company has awarded 29.5% of its working interest in the Buganviles Block Petrodorado Ltd in exchange for Petrodorado providing 100% of total investment for future exploratory work in the block, equal to US $2.27 million. This exploration phase involves a minimum investment of US $4.6 million, which will be spent on the drilling of one new exploratory well. The company will retain a 19.875% working interest in future exploratory activities and a 49.375% working interest in the rest of the block.

Peruvian Blocks:

Block 135: Located in the Maranon Basin. The company has awarded 45% of its working interest in Block 135 to Petrodorado in exchange for Petrodorado providing 45% of the total investment for the second exploratory phase for the block, equal to US $16.2 million. This exploration phase requires a minimum investment of US $36 million, which will be spent on the acquisition of 704km of 2D seismic and the drilling of one exploratory well. The company will retain a 55% working interest in the block.

Block 138: Located in the Ucayali Basin. The company has awarded 45% of its working interest in Block 138 to Petrodorado in exchange for Petrodorado providing 45% of the total investment for the second exploratory phase for the block, equal to US $15.3 million. This exploration phase requires a minimum investment of US $34 million, which will be spent on the acquisition of 525km of 2D seismic and the drilling of one exploratory well. The company will retain a 55% working interest in the block.

Ronald Pantin, Chief Executive Officer, commented, "The partial farming out of our exploratory portfolio will permit the company to focus its investments on its producing assets and low risk exploration. This process strengthens our ability to pursue the growth strategy which the company has envisioned for 2010 and beyond."

The assignment by the company of the working interests is subject to the execution of closing documents relating to each farm-out transaction as well as, where applicable, Colombian or Peruvian governmental and/or regulatory approvals.
 

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