Petrolia Farms Out Canadian Land Lease
Petrolia announced the signing of a farmout agreement in the amount of $20 million with an oil company. This amount will be invested in exploration and development work in the Bourque property, located 50 km northwest of the town of
Many types of geological structures can contain hydrocarbons; amongst these, recifal structures make some of the best known reservoirs. A reinterpretation of vintage seismic data suggests the presence of such reefs under the Bourque property, along a 20 kilometre trend. If the geological conditions are favourable, these giant structures have the potential of containing considerable quantities of hydrocarbons.
During the Devonian period, the Gaspes region was close to the Equator and the environment was favourable to the development of reef complexes. It was during this same period that the reef complexes of the
Terms of the agreement
In order to earn a 70% interest in the four leases of the Bourque property, the Oil Company shall, without Petrolia's financial participation, spend $20M during the next five years according the following terms:
- During the coming 18 months, the Oil Company shall spend a minimum of $2.5M in a seismic survey, to secure its right to participate in this agreement;
- During the coming three years, the Oil Company shall invest an amount of $8M in exploration work to earn a 24% stake in the property;
- During the coming five years, the Oil Company may increase its stake to 48% by investing a cumulative amount of $16M, or increase its stake to 70% by investing a additional $4M for a total amount of $20M;
- In consideration of the $20M investment, the Oil Company may be reimbursed up to $6M which will be taken from Petrolia's production revenues;
- Royalties of 5.5% are payable on the production from these four leases;
- For the duration of this agreement, Petrolia will act as the operator under the oversight of a bipartite executive committee.
"The agreement is of vital importance for Petrolia not only if you consider the amounts invested, but especially because of the considerable oil potential associated with this type of trap. The discovery of hydrocarbons in such a context would open wide the door to oil exploration in the
By forming joint ventures to develop its properties, Petrolia is aiming to share the risks related to this kind of investment while taking advantage of its partners' expertise. This joint venture also makes it possible to limit the issuance of new shares while maximizing exploration work on Petrolia's leases.
- Lundin Spuds Zulu Prospect (Jan 20)
- Statoil's Tastaveden Well Turns out Water Wet (Feb 18)
- Petrolia: Estimates of 1 Tcf of Wet Natural Gas in Bourque (Apr 10)