Petroleum Africa
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Monday, August 22, 2011
Winstar Resources has entered into a MoU with a privately held European exploration and production company (Privateco) to farm-out for cash and a work program, up to 50% of Winstar’s current 45% working interest in the Sabria Concession in Tunisia, including existing production, inventory and reserves.
Winstar and Privateco have agreed to expeditiously work towards drafting and executing a comprehensive farm-out agreement plus ancillary agreements in accordance with the commercial terms and conditions contained within the executed MoU.
The basic terms and conditions of the MoU will see Privateco earn an undivided 22.5% working interest within the Sabria Concession upon closing in exchange for a cash payment of $6.55 million, subject to final closing adjustments, and a work commitment to pay 45% of the capital costs to work-over an existing Sabria well. It will also cover 45% of the costs to drill and complete three new Sabria horizontal development wells to a depth that makes it possible to exploit the reserves within the Ordovician Sandstones of the Hamra and El Atchane Formations.
The work commitment is to be completed within 2.5 years from the date on which the Tunisian government issues a decree granting approval of the title transfer to Privateco. The work commitment is subject to budgetary approval by state company ETAP which owns the remaining 55% working interest in the Sabria Concession.
Winstar will remain as the operator of the concession.
The potential farm-out will enable Winstar to accelerate the development of the extensive probable reserves associated with the Sabria Concession and provides incremental working capital to fund its current and near term capital programs. The deal will also providesmeaningful near-term incremental drilling operations at Sabria during a period in which Winstar’s capital is focused on developing the Triassic and Silurian potential within its southern Tunisian concessions of Chouech Essaida and Ech Chouech.
This transaction is subject to execution of the formal transaction documents and final approval by the parties’ respective boards and the government of Tunisia.
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