CALGARY, Feb. 28, 2014 /CNW/ - PetroNova Inc. ("PetroNova" or the "Company") (TSX-V: PNA), a company engaged in the exploration and development of oil and natural gas resources in Colombia, is pleased to announce that its indirect wholly owned subsidiary, PetroNova Colombia Inc. ("PetroNova Colombia"), has entered into a farm-out agreement (the "FOA") with a wholly owned subsidiary of Pacific Rubiales Energy Corp. ("Pacific Rubiales") (TSX:PRE; BVC: PREC; BOVESPA: PREB) for the exploration and potential development of PetroNova's operated Tinigua exploration and production contract (the "Tinigua Contract") awarded by the Agencia Nacional de Hidrocarburos of Colombia (the "ANH"). PetroNova currently owns 90% of the rights to the Tinigua Contract indirectly through PetroNova Colombia.
Antonio Vincentelli, President and CEO of PetroNova, commented, "The Tinigua prospect is one of the largest unexplored prospects in Colombia and the highest impact prospect in PetroNova's portfolio, with best estimate unrisked Prospective Resources of approximately 159 million barrels. This agreement enables PetroNova to develop the Tinigua prospect with minimum additional financial commitments until the commercial phase. We are looking forward to working with such a prominent Colombian oil and gas exploration and production company to determine the potential of the Tinigua prospect."
Key terms and conditions
Pursuant to the terms of the FOA, Pacific Rubiales will pay PetroNova Colombia a cash consideration of U.S.$12.5 million for back-costs associated with the Tinigua Contract, and will carry the cost of drilling, completing, and testing of up to four wells for up to U.S.$33 million to earn a 50% participating interest in the Tinigua Contract.
Pacific Rubiales will assume up to U.S.$19 million of Pacific Rubiales' and PetroNova Colombia's share of the capital and operational expenditures for the first and second exploratory wells to be drilled in the Tinigua Contract area, of up to U.S.$12 million and up to U.S.$7 million, respectively.
Should Pacific Rubiales refrain from exercising its right of withdrawal after the first exploratory well, Pacific Rubiales will assume up to U.S.$7 million of Pacific Rubiales' and PetroNova Colombia's share of the capital and operational expenditures for each of the third and fourth exploratory wells to be drilled in the Tinigua Contract area (the "Additional Carry Obligation"). PetroNova Colombia's share of the Additional Carry Obligation will be repaid to Pacific Rubiales by PetroNova Colombia out of 50% of PetroNova Colombia's corresponding production share from the Tinigua Contract.
During the last phase of the exploration period of the Tinigua Contract, Pacific Rubiales shall have, at its sole discretion, the option to be designated the operator of the Tinigua Contract. If Pacific Rubiales elects to become the operator, Pacific Rubiales will pay PetroNova Colombia an additional one-time consideration of U.S.$4 million.
The Joint Operating Agreement negotiated corresponds with The Association of International Petroleum Negotiators' 2002 model Joint Operating Agreement and reflects a balanced condition of the parties according to the participating interests in the agreement.
Closing of the transactions contemplated by the FOA is subject to customary closing conditions, including the receipt of ANH approval.
Tinigua exploration and production contract:
The Tinigua Block is 105,471 gross acres in size and is located in the northern portion of the Caguan-Putumayo Basin. The Tinigua prospect is a large fault propagation fold structure, with an aerial extension of approximately 15 km2 confirmed by 109 km2 of 3D seismic. Petrotech Engineering Ltd. prepared an independent resource assessment report for PetroNova effective February 28, 2013 (the "Petrotech Report") in which the Tinigua prospect was assigned a total best estimate (P50) Prospective Resources of approximately 159 million barrels of heavy oil. The Petrotech Report was prepared in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and the COGE Handbook.
PetroNova Colombia has been granted an environmental license for the Tinigua Block to drill up to twenty exploratory wells from five different platforms and install surface facilities required to conduct the extended testing if required.
The first exploratory A3 well is expected to spud in the second half of 2014 and will target both the tertiary Mirador Formation as well as the Cretaceous age Macarena Group with a total depth of approximately 6,500 feet.
The Company, through its subsidiaries, is engaged in the exploration for, and the acquisition and development of, oil and natural gas resources in South America, specifically in Colombia. The Company's assets currently include the Company's interests in the PUT-2 and Tinigua Blocks located in the Caguan-Putumayo Basin in Colombia, both of which are operated by the Company, and the non-operated Llanos Blocks located in the Llanos Basin in Colombia. The common shares of the Company trade on the TSX Venture Exchange under the stock symbol "PNA".
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this press release constitute forward-looking statements. These statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "intend", "plan", "continue", "estimate", "budget", "targeting", "project", "expect", "may", "will", "might", "should", "could", "believe", "predict" and "potential" and similar expressions are intended to identify forward-looking statements. Such statements represent the Company's internal projections, estimates, expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Management believes the expectations reflected in these forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
In particular, this press release contains forward-looking statements pertaining to the closing of the transactions contemplated by the FOA, including the approval of the ANH; and the Company's future exploration and development activities with respect to the Tinigua Block and the timing thereof. With respect to forward-looking statements contained in this press release, assumptions have been made regarding, among other things: the ability of PetroNova to obtain the approval of the ANH in a timely manner; the ability of the parties to satisfy the other conditions contained in the FOA in a timely manner; the completion of the transactions contemplated by the FOA as currently contemplated by the parties; general economic, market and business conditions in Colombia and globally; future crude oil and natural gas prices; the continued availability of capital, undeveloped lands and skilled personnel; the ability to obtain equipment in a timely manner to carry out exploration and development activities; the regulatory framework governing royalties, taxes and environmental matters in Colombia and any other jurisdictions in which the Company may conduct its business in the future; the ability of the Company to obtain the necessary approvals, permits and licences to conduct its operations; future capital and exploration expenditures to be made by the Company; future sources of funding for the Company's exploration program; the geography of the areas in which the Company is exploring; and adequate weather and environmental conditions.
Information relating to "resources" is deemed to be forward-looking information as it involves the implied assessment, based on certain assumptions and estimates, that the resources described exist in the quantities predicted or estimated and can be profitably produced in the future.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain risk factors, including, but not limited to: general economic, market and business conditions; risks related to the exploration, development and production of oil and natural gas; risks inherent in the Company's international operations, including security and legal risks in Colombia; risks related to the timing of completion of the Company's projects; competition for, among other things, capital, the acquisition of resources and skilled personnel; actions by governmental authorities, including changes in government regulation and taxation; the failure of the Company to obtain the necessary approvals, permits and licences to conduct its operations; environmental risks and hazards; the availability of capital on acceptable terms; the failure of the Company or the holder of certain licenses or leases to meet specific requirements of such licenses or leases; adverse claims made in respect of the Company's properties or assets; failure to engage or retain key personnel; geological, technical, drilling and processing problems, including the availability of equipment and access to properties; failure by counterparties to make payments or perform their operational or other obligations to the Company in compliance with the terms of contractual arrangements between the Company and such counterparties; and the other factors discussed under the heading "Risk Factors" in the Company's annual information form for the year ended December 31, 2012 and the Company's other continuous disclosure documents filed from time to time with applicable securities regulatory authorities in Canada and which may be accessed on the PetroNova's SEDAR profile at www.sedar.com.
With respect to the FOA and the transactions contemplated thereby, the risks and uncertainties include the failure of PetroNova to obtain the approval of the ANH or the failure of the parties to otherwise satisfy the conditions contained in the FOA, in a timely manner, or at all. Failure to so obtain ANH approval, or the failure of the parties to otherwise satisfy the conditions contained in the FOA, may result in the transactions contemplated in the FOA not being completed on the proposed terms, or at all, the result of which could have a material adverse effect on PetroNova's financial position and results of operations and its ability to fund current operations on the Tinigua Block.
Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements included in this press release are expressly qualified by this cautionary statement and are made as of the date of this press release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.
Prospective Resources are those quantities of oil and gas estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. The chance of commerciality is the product of these two risk components. The Prospective Resource estimates contained herein have not been risked for either the chance of discovery or the chance of development. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources. Application of any geological and economic chance factor does not equate Prospective Resources to contingent resources or reserves.
As with all oil and gas fields at this stage of appraisal, there are significant positive and negative factors which may impact the resource volumes for the Tinigua Block. There is a significant range of uncertainty associated with the resource volumes due to risk elements such as trap and seal characteristics; reservoir presence and quality; source rock capacity, quality and maturity; and timing, migration and preservation of petroleum in relation to trap and seal formation. Uncertainty ranges are described by the Canadian Oil and Gas Evaluation Handbook as low, best and high estimates for resources. The "best estimate" is considered to be the best estimate of the quantity that will actually be recovered from the accumulation. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate.
SOURCE: PetroNova Inc.
For further information:
President & Chief Executive Officer
954 317 3990
Stelvio Di Cecco
Chief Financial Officer
954 317 3990
403 218 2887