Gabon, West Africa
On September 20, 2006, the Company acquired an indirect 72% interest after payout in a production sharing agreement (the "Production Sharing Agreement") granted by the Gabon Ministere des Mines, de l'Energue, de l'Ectricite et des Resources Hydrauliques (the "Ministry") in respect of approximately 2,200 square kilometres of oil and gas concessions located in the Gabon Estuary referred to as the Nkani G4-222 Property (the "Property").
This block is an onshore block which is crossed over by the Gabon Estuary that may be considered as a shallow marine area as far as surface exploration conditions are concerned. The block has been previously explored by Elf Gabon and former companies (from 1944 to the early eighties) and more recently by Conoco for the most eastern part of the block. A large number of seismic surveys have been shot, including within the Gabon estuary. Six deep wells have been drilled including the Bikele-1 well, a deep test down to 4306m.
NKANI G4-222 highlights: (see the 51-101 technical report for further details)
- Oil shows are reported in Bombie-1 and Coniquet-1 well
- A potential gas field (9 m thick proven gas layer) is identified in Ozoumbele-1 well
- A potential petroleum system is therefore proven in the Gamba/Como and Coniquet formations with good reservoirs and associated seals.
In consideration for acquiring an indirect interest in the Production Sharing Agreement, the Company issued 6,000,000 common shares to an arm's length party, paid US$3,600,000 to the Ministry representing a portion of the signing bonus payable in respect of the issuance of the Production Sharing Agreement, and assumed its obligations contained in the Production Sharing Agreement.
The principal terms of the participation agreement pursuant to which the Company acquired its interest in the Production Sharing Agreement are as follows:
- The Company has an 80% interest before payout and a 72% interest after payout, in the Production Sharing Agreement covering the Property.
- Austin Developments Corp. ("Austin") has a 20% interest before payout and an 18% interest after payout and the ATAS Group of Saudi Arabia has a 10% carried interest after payout. The Government of Gabon has a back-in right for a 15% carried interest, with an option for an additional 5% carried interest if production exceeds 30,000 barrels per day.
The Company will initially act as the manager of the Property but it is contemplated that a contract manager will be retained prior to the commencement of exploration operations.
The Production Sharing Agreement provides for a five-year exploration period plus an additional 4 year exploration period. The minimum work obligation in the first exploration period requires expenditures of US$10,000,000 and includes 700 kilometres of 2D seismic and one exploration well. The second exploration period requires expenditures of US$12,000,000 and includes one firm and one option exploration well.
