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Perth, Oct 22, 2009 (ABN Newswire) - Kairiki Energy Limited (ASX:KIK)(PINK:KAIRF) has achieved a significant milestone in the development of the Tindalo project after its wholly-owned subsidiary Yilgarn Petroleum Philippines Pty Ltd entered into an agreement with Trafigura Ventures III BV (Trafigura) to farm-out 5% of its current 40% interest in the highly prospective Service Contract 54 Block A (SC 54A). Kairiki's Joint Venture partner, Nido Petroleum Philippines Pty Limited (Nido), has also advised Kairiki that it has reached a similar agreement with Trafigura to farm-out 10% of Nido's working interest in SC 54A on similar terms and conditions.
The farm-out agreement with Trafigura enables the Joint Venture to progress towards development of the Tindalo oil discovery followed by other targets within SC 54A, which contains significant additional contingent and prospective resources.
Consideration is a cash payment of US3.8 million (~A$4.2 million) after which Trafigura will be responsible for its participating interest share of the development costs of the Tindalo oil field project. Nido, the operator, is currently finalising arrangements for the rig and FSO and preparing for final investment decision approvals for the project.
Under the terms of a separate crude oil marketing agreement, Trafigura's affiliate Trafigura Pte Ltd will market Kairiki's net share of the crude oil produced from SC 54A.
Kairiki's Managing Director, Mr Lawrence Brown said, "I am extremely pleased to welcome Trafigura into the SC 54A Joint Venture, they are a world renowned oil marketing company who bring a wealth of oil industry experience which is complementary to the Joint Venture. Trafigura recognise SC 54A, which contains the Tindalo and Yakal oil discoveries, as a highly attractive opportunity and one which also has the potential to host significant additional oil resources."
Trafigura's Crude Trading Manager, Mr Richard King, said, "Trafigura was attracted to SC 54A as it presented an opportunity to participate in a rapid, low cost oil field development with the prospective for multiple follow-on projects in the near future, each of which has the potential for a high cash flow profile and rate of return. It also allows Trafigura to add significant value to the Joint Venture through its specialist expertise in "downstream" areas of the industry."
The farm out agreement is subject to final legal due diligence, Philippine government approvals and receipt of a release of the charge held by the Convertible Note Holder (IMC Group) over the 5% interest to be sold by Kairiki. Upon satisfaction of these conditions (and assuming that the corresponding Nido agreements are also concluded).
In the event that Philippine government approval is not forthcoming by 30 March 2011, Trafigura has the right to terminate and be repaid the consideration amount and any cash calls less any revenue they have received from SC 54A.
The Joint Venture is currently finalising the major contracts and funding plan, of which this farm-out is a key component, in order to proceed to the final investment decision for the Tindalo project in the short term.
The farm-out agreement with Trafigura enables the Joint Venture to progress towards development of the Tindalo oil discovery followed by other targets within SC 54A, which contains significant additional contingent and prospective resources.
Consideration is a cash payment of US3.8 million (~A$4.2 million) after which Trafigura will be responsible for its participating interest share of the development costs of the Tindalo oil field project. Nido, the operator, is currently finalising arrangements for the rig and FSO and preparing for final investment decision approvals for the project.
Under the terms of a separate crude oil marketing agreement, Trafigura's affiliate Trafigura Pte Ltd will market Kairiki's net share of the crude oil produced from SC 54A.
Kairiki's Managing Director, Mr Lawrence Brown said, "I am extremely pleased to welcome Trafigura into the SC 54A Joint Venture, they are a world renowned oil marketing company who bring a wealth of oil industry experience which is complementary to the Joint Venture. Trafigura recognise SC 54A, which contains the Tindalo and Yakal oil discoveries, as a highly attractive opportunity and one which also has the potential to host significant additional oil resources."
Trafigura's Crude Trading Manager, Mr Richard King, said, "Trafigura was attracted to SC 54A as it presented an opportunity to participate in a rapid, low cost oil field development with the prospective for multiple follow-on projects in the near future, each of which has the potential for a high cash flow profile and rate of return. It also allows Trafigura to add significant value to the Joint Venture through its specialist expertise in "downstream" areas of the industry."
The farm out agreement is subject to final legal due diligence, Philippine government approvals and receipt of a release of the charge held by the Convertible Note Holder (IMC Group) over the 5% interest to be sold by Kairiki. Upon satisfaction of these conditions (and assuming that the corresponding Nido agreements are also concluded).
In the event that Philippine government approval is not forthcoming by 30 March 2011, Trafigura has the right to terminate and be repaid the consideration amount and any cash calls less any revenue they have received from SC 54A.
The Joint Venture is currently finalising the major contracts and funding plan, of which this farm-out is a key component, in order to proceed to the final investment decision for the Tindalo project in the short term.
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About Kairiki Energy Limited
Kairiki Energy Limited (ASX:KIK)(PINK:KAIRF) is an Australian Based junior international oil and gas exploration and production company focussed on the Philippines. Kairiki holds a 30.1% interest in Service Contract 54A and a 40% interest in Service Contract 54B.
SC 54A measures 862 km2 and contains the Tindalo, Yakal, Nido 1X1 and Signal Head oil discoveries as well as a substantial portfolio of similar low-risk reefal prospects. In December 2009, Kairiki announced that the SC 54A Joint Venture had approved the development of the Tindalo field. The Tindalo development utilises a jack-up rig and a dynamically positioned storage vessel. Following a short project execution period, the Tindalo development tested oil at 18,689 bbls/d at the end of May 2010. Since that time, unexpected early water ingress to the well has resulted in the SC 54A Joint Venture preparing for a well re-entry and remediation programme to reduce or eliminate the water production. Based on a successful development at Tindalo a number of follow-up developments may be considered in SC 54A.
SC 54B measures 3184 km2 and contains the Gindara prospect which has a mean unrisked oil in place volume estimated by the Operator, of 634 million barrels. The Gindara prospect is a very large simple four-way closure at the Top Nido Limestone reservoir objective with an areal extent of 28 km2, a vertical closure of over 300m and is well located to receive hydrocarbon charge from the Palawan Trough. Kairiki is seeking to farm down its interest in SC 54B to accelerate drilling of the Gindara prospect.
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