Strike has secured an option over the Cadlao oil field in the Republic of the Philippines.
Cadlao Oil Field
The Cadlao oil field is located 50 kilometers offshore Palawan, Philippines, and is 100% held through Service Contract 6 (Cadlao) by unlisted Australian public company Blade Petroleum Limited ("Blade"). Venture Oil Inc, a Philippines registered company, holds a right to acquire a 20% interest.
The field was previously operated by Amoco and produced 11.1 million barrels between 1981 and 1991. A more recent 3-D seismic survey revealed additional structural detail including the potential for undrained oil.
These Reserves provide a four fold increase to Strike’s existing oil and gas Reserves inventory. An early production development program is proposed which would see oil production commencing in the fourth quarter of calendar 2010 at an initial rate in the order of 5,000 to 10,000 barrels per day, delivering substantial cashflow to Strike.
The project is covered with 15 years remaining on a Service Contract (similar to a Production Sharing Contract, or PSC) providing project tenure until 2023. The project approval process is well advanced and a Plan of Development was approved in July 2009 by the Republic of Philippines Department of Energy.
The Acquisition Option
Strike has secured an option to acquire 100% of the issued capital of Blade in consideration for the payment of up to A$20 million, comprising:
Due diligence is underway. The option term expires on January 31, 2010. The proposed transaction provides a low cost acquisition for Strike. Under the terms of the transaction 2P oil Reserves are being acquired for US$4.20 per barrel (A$4.60 per barrel).
Potential Low Capital Expenditure Development
Strike and Blade believe that low capital expenditure ("capex") development options are available and commercial discussions to this end have commenced. Capex exposure can be further limited by a range of financing options. Strike will have the opportunity to review the outcome of some of these dealings before deciding whether to exercise the option to acquire Blade ensuring that Strike is only committed to proceed with the acquisition on a manageable basis.
Strike Energy's Managing Director, Simon Ashton, said, "The deal gives us exposure to a substantial reserve base and a subsequent production hike during 2010 which will add to our existing production from the US and provide a favourable balance to our existing Australian exploration opportunities."
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