Sea Dragon Snaps Up 50% Stake in Egyptian Concession
Sea Dragon has signed a Farm-out Agreement with Dana Gas Egypt Ltd. ("DGE") pursuant to which Sea Dragon will acquire a fifty (50%) percent participating interest in the Komombo (Block-2) Concession, located approximately 1,000 km south of Cairo on the West Bank of the Nile River. Sea Dragon's acquisition of a participating interest in the Komombo (Block-2) Concession is subject to the consent and approval of the responsible authority. The Kom Ombo (Block-2) Concession is held by Dana Gas PJSC, which is the successor company to Centurion Energy International Inc. who was originally awarded the Komombo (Block-2) Concession.
The Komombo (Block-2) Concession is a large exploration block (approximately 11,446 Sq. Km) which contains the Al-Baraka Development Lease. The Al-Baraka oil field is located in the Al-Baraka Development Lease and according to Sea Dragon's internal estimates, has a discovered, undeveloped oil accumulation of approximately 100 million barrels of Original Oil in Place as Discovered Resources in two productive zones.
Four wells were drilled in the field of which three wells are currently on production at approximately 850 bopd. According to DGE's latest Press Release, the fourth well drilled in the Al-Baraka field has encountered approximately 50 feet of oil pay in the previously defined reservoirs and some 25 feet of oil pay in a new reservoir. Preliminary testing of the new zone indicates the well to be capable of producing
at a maximum rate of 1300 bopd. The Al-Baraka wells are shallow vertical wells (4500 feet) and the oil is light, 37 Degree API. Under the terms of the Al-Baraka Development Lease, the holders of the lease have the right to produce the field for a period of 20 years with possible extensions.
Future development plans for the Al-Baraka oil field include the drilling of some 30 development wells over the next several years. Horizontal drilling and specialized fracturing are the techniques being considered in order to maximize production rates and oil recovery.
According to Sea Dragon's internal estimates, the Komombo (Block-2) Concession currently has an additional 300 million barrels of Original Oil in Place as Undiscovered Resources in multiple oil zones. The Concession is currently in its third and final exploration phase which will end in 2012. A 280 sq. km 3D seismic program is planned to be followed by a three-well exploratory drilling program targeting multi-level prospects away from the Al-Baraka field.
The total consideration paid by Sea Dragon to DGE is US $45 million subject to working capital adjustments. This consideration is to be paid in full by April 30, 2010. Approximately US $20 million shall be cost recoverable by Sea Dragon out of future production revenue. As owner of a 50% participating interest in the Komombo (Block-2) Concession, Sea Dragon will be required to pay its 50% share of future expenditures and is entitled to receive a 50% share of all future production revenues and 50% of all cost recoveries as specified in the Concession Agreement. Under the terms of the Farmout Agreement, Sea Dragon and DGE will jointly operate the Komombo (Block-2) Concession.
Commenting on the acquisition of the Komombo (Block-2) Concession, Mr. Said Arrata, Sea Dragon's Chairman and CEO said, "This is a very significant event in the growth cycle of our Company. It marks our second success in aggressively acquiring discovered undeveloped resources with significant exploration upside. We are very excited about the development potential of the Al-Baraka Field. The Komombo (Block-2) Concession is a very attractive and highly prospective concession block for which we have high expectations. We are looking forward to jointly operating this property with DGE and are optimistic that we can achieve significant production levels over the short term through the application of new technologies."
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