Sintana Energy Announces VMM-37 Farmout Agreement with ExxonMobil
TORONTO, Nov. 12, 2012 /CNW/ - Sintana Energy Inc. (TSX-V: SNN) ("Sintana" or the "Company") is pleased to announce that Patriot Energy Oil & Gas Inc. ("Patriot"), wholly-owned by the Company, has entered into a Farmout Agreement (the "Agreement") with ExxonMobil Exploration Colombia Limited, a wholly owned subsidiary of Exxon Mobil Corporation ("ExxonMobil") (NYSE: XOM) for the exploration and development of unconventional oil and gas resources underlying the 43,000 acre VMM-37 Block in Colombia's Middle Magdalena Basin. Major elements of the VMM-37 Agreement are as follows:
- Subject to approval by the Agencia Nacional de Hidrocarburos of Colombia (the "ANH"), ExxonMobil will acquire an undivided 70% participation interest and operatorship in the formations defined as unconventional by completing the Work Program described below.
- Patriot will retain the remaining 30% interest in the unconventional play as well as its current 100% participation interest in the conventional resources overlying the top of the unconventional interval.
UNCONVENTIONAL vs. CONVENTIONAL:
- For purposes of this Agreement, unconventional formations are defined as the La Luna and deeper.
ExxonMobil will pay 100% of all Exploration Phase I well costs (3
wells). The estimated timing for the commencement of drilling
operations on the first exploration well is the third quarter of 2013.
A consideration will be paid that will compensate Sintana for its past
expenses connected with the block.
ExxonMobil will have an option to proceed to the next phase. In this
development phase, it will pay 100% of all additional costs to a
maximum of US $45 million, of which US $10 million will be recouped by
ExxonMobil from 50% of Patriot's production proceeds.
As agreed by Patriot and ExxonMobil, as joint participants in the Block,
good faith efforts will be made to locate exploration wells targeting
the unconventional play in such a way as to also test conventional
- At various stages of the Work Program, as defined in the Agreement, ExxonMobil will have the right to withdraw from the project, relinquish operatorship and reassign to Patriot the right to the 70% participation interest it would have retained had it met all investments and activities requirements of the Agreement.
SUPPLEMENTAL INVESTMENT CAPITAL:
- In the event that exploration and development of the unconventional resources continue beyond the activities and costs enumerated above, those costs will be shared based on the parties participating interests.
- Further exploration and subsequent development plans for the unconventional and conventional formations will be decided on once technical data obtained from drilling the deeper unconventional play, and other sources, are analyzed.
- The ANH requires that operators provide secured performance warranties for various phases of the contractual Work Program. Sintana currently has in place a letter of credit in satisfaction of this requirement. ExxonMobil will assume responsibility for providing these warranties resulting in the release of restricted Sintana funds currently on deposit to secure the existing letter of credit.
Sintana's CEO, Doug Manner, commented, "Both the conventional and unconventional formations on VMM-37 offer tremendous potential for large discoveries with compelling economics. ExxonMobil owns interests in, and is the operator of, a number of very large, highly complex unconventional projects in multiple countries. It is on the leading edge of developing and applying highly technical methods and complex processes to discover, develop and produce unconventional reserves. We are fortunate to have ExxonMobil as our partner and look forward to a long and very successful working relationship."
The Company will host a conference call on November 13th at 2:00 pm (EST) to discuss key highlights of the transaction. A question and answer session will follow. Details regarding the conference call, including dial-in instructions, will be disclosed later today.
ABOUT SINTANA ENERGY
The Company is primarily engaged in petroleum and natural gas exploration and development activities in Colombia and Peru. The Company's exploration strategy is to acquire, explore, develop and produce superior quality assets with significant reserve potential. The Company currently holds a 25% interest in the 175,000 acre Bayovar Block XXVII in the Sechura Basin, Peru. The Company's private participation interests in Colombia include 30% in 58,570 acres in the Talora Block and 30% in 272,021 acres in the COR-39 & COR-11 Blocks in the Upper Magdalena Basin. In the Middle Magdalena Basin, private participation interests are 100% in the 43,158 acre VMM-37 Block and 25% (carried) in the 154,909 acre VMM-4 and 59,522 acre VMM-15 Blocks. In the Llanos Basin, the company has a carried 25% private participation interest in the 11,624 acre LLA-18 Block. These interests are subject to all applicable regulatory and governmental approvals, including those of Colombia's National Hydrocarbon Agency (ANH). The Company continues to evaluate a portfolio of exploration opportunities in South America.
On behalf of Sintana Energy
Chief Executive Officer
This news release includes forward-looking statements related to the expected occurrences in relation to the properties identified. A multitude of factors can cause actual events to differ significantly from any anticipated development and although the Company believes that the expectations represented by such forward-looking statements are reasonable at the time of preparation; there can be no assurance that such expectations will be realized in whole or in part. These forward looking statements are based on assumptions that the Company has made concerning the oil and gas industry in South America, that all applicable regulatory approvals will be obtained, the reliability of available data regarding the properties and increasing demand for oil and gas. Risk factors which may cause actual results to differ from those anticipated in such forward looking statements include but are not limited to, the risk that ExxonMobil may opt to withdraw from the VMM-37 project at various stages of the work program, risks associated with the uncertainty of exploration results and estimates, currency fluctuations, the uncertainty of conducting operations under a foreign regime, exploration risk, the uncertainty of obtaining all applicable regulatory approvals, the availability of labour and equipment, the fluctuating prices of oil and natural gas, the availability of financing and the Company's dependence on Sintana's management personnel and other participants in the property areas, including ExxonMobil. Neither the Company nor any of its subsidiaries nor any of its officers or employees guarantee that the assumptions underlying such forward-looking statements are free from errors, nor do any of the foregoing accept any responsibility for the future accuracy of any of the opinions expressed in this document or the actual occurrence of forecasted developments.
Undue reliance should not be placed on these forward-looking statements as there can be no assurance that such expectations will be realized. The forward-looking statements contained in this document are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. This press release does not constitute an offer to sell or a solicitation to buy any of the securities of Sintana Energy Inc. in the United States.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Sintana Energy Inc.