Petrolatina Energy: Shell E&P Columbia To Buy 85% Interest In VMM-28
15 July 2011 - 6:38PM
Dow Jones News
Petrolatina Energy PLC (PELE.LN), an independent oil and gas
exploration, development and production company focused on Latin
America, said Friday it has entered into a farm-out agreement with
Shell E&P Colombia, effective July 12 whereby Shell E&P
Colombia will buy an 85% participating interest in the Company's
VMM-28 Exploration and Production contract.
MAIN FACTS:
-VMM-28 block is currently wholly owned and operated by
Petroleos del Norte S.A., or PDN, PetroLatina's Colombian operating
subsidiary.
-Shell E&P Colombia has agreed to pay a fee of $15 million
in cash to PetroLatina, of which $3 million is payable on execution
of the agreement and the balance on receipt of the requisite
Agencia Nacional de Hidrocarburos, or ANH approval.
-Shell E&P Colombia will be appointed as operator of the
contract and will take responsibility for the work program.
-In the event that ANH approval isn't forthcoming by Sep. 30,
Shell E&P Colombia has the right to terminate the agreement and
require any payments made by it to PetroLatina to be repaid.
-Under the agreement, PetroLatina has granted Shell E&P
Colombia a six year period of operational exclusivity; during this
period, Shell E&P Colombia will pay for 100% of the costs,
expenses and liabilities associated with the work program and shall
be entitled to all rights in relation to the block.
-Shell E&P Colombia will make available to PetroLatina all
data acquired by it in relation to the contract area and ensure
that the license area remains in good standing and will comply with
all applicable laws, regulations and orders of Colombia.
-Under the agreement, Shell E&P Colombia will obtain an 85%
participating interest in the block; PDN will retain a 15% legal
interest with an option to participate in the block upon expiration
of the exclusivity period.
-PetroLatina shall pay its share of the costs, expenses and
liabilities associated with the block and shall pay Shell E&P
Colombia for its share of Shell E&P Colombia's total sunk costs
incurred to such date, out of PetroLatina's share of production
within the block.
-Operations on the VMM-28 block would thereafter be governed by
a joint operating agreement.
-In the event that Shell E&P Colombia decides to withdraw
from the farm-out agreement, the Company has the option to request
that Shell E&P Colombia transfers its prevailing interest in
the block back to PetroLatina.
-Following the receipt of ANH approval, Company intends to use
the proceeds from the farm-out agreement to assist with the part
funding of its planned ongoing drilling program and development
commitments in respect of the remainder of its Colombian asset
portfolio and for general working capital purposes.
-Petrolatina Energy shares at 0805 GMT up 2 pence, or 6.4%, at
27 pence valuing the company at GBP33.14 million.
-By Ian Walker, Dow Jones Newswires; 44-20-7842-9296;
ian.walker@dowjones.com
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