Eurogas Corporation announces that Eurogas and Atlas Petroleum Exploration Worldwide, Ltd. (“APEX”) have entered into a Farmout Agreement with Delta Hydrocarbons B.V. (“Delta Hydrocarbons”) with respect to the Sfax Offshore Exploration Permit located offshore Tunisia in the Gulf of Gabes. Eurogas and APEX currently hold 45% and 55% participating interests, respectively, in the Sfax Permit. The farmout agreement with Delta Hydrocarbons is subject to regulatory approval from ETAP, the Tunisian state oil company, and the Government of Tunisia.
Delta Hydrocarbons has committed to spend USD $125 million on the Sfax Permit for a 50% participation in the permit. The partners have agreed to a work program which includes drilling the Ras El Besh 3 well, as the first of a three well drilling program which is scheduled to commence immediately. After completion of the first two wells the drilling rig will move to the Jawhara discovery and drill an appraisal well while installation of production facilities is underway at Ras El Besh. The work program also includes the acquisition of facilities as and when required.
Included in the USD $125 million and as part of the transaction, Eurogas and APEX will be entitled to repayment of past exploration costs incurred on the Sfax permit, of which, approximately USD $11 million is net to Eurogas.
Upon spending the committed amount of USD $125 million, Eurogas would own a 22.5% participating interest in the farmout area, APEX would have a 27.5% participating interest, and Delta Hydrocarbons would own a 50% participating interest. APEX will serve as operator under the farmout. After Delta has expended USD $125 million, the project reverts to a joint venture participation for future payment and Eurogas will be responsible for its 22.5% share of any such payments.
Delta Hydrocarbons is a recently formed oil and gas company based in Amsterdam (The Netherlands) and is focused on maximizing value from discoveries and mature assets (www.deltahydrocarbons.com).
During 2005, Eurogas and APEX converted the Sfax prospecting permit to an exploration permit which included a commitment to drill one well and acquire seismic data. To date the partners have met the seismic commitment by acquiring over 900 km2 of high quality 3D seismic. The Ras El Besh 3 well will be the commitment well for the Sfax exploration permit.
Also in 2005, Eurogas and its operating partner applied for an exploitation concession (the “REB Exploitation Concession”) over the Ras El Besh prospect. The farmout enables Eurogas and APEX to meet all requirements in that regard.
The Farmout Agreement with Delta Hydrocarbons covers, inter alia, the area previously covered by the farmout agreement with Anadarko Petroleum Corporation (“Anadarko”) as well as three prior discoveries including Ras El Besh which were excluded from the Anadarko transaction. As disclosed in the March 14, 2008 Eurogas Rights Offering Circular, Anadarko had the option, until April 1, 2008 to commit to drill an exploration well by December 31, 2008. As Anadarko did not elect to proceed, it forfeited all rights to conduct work or to receive any interest in the area.