THE WOODLANDS, TX, June 29, 2012 /CNW/ - Porto Energy Corp., ("Porto" or the "Company") (TSXV:PEC), a company focused on oil and gas exploration, appraisal and development in Portugal, today announced that it has entered into a definitive farmout agreement (the "Agreement"), through its wholly-owned subsidiary Mohave Oil and Gas Corporation, with Petróleos de Portugal - Petrogal ("Galp"). Galp will pay the Company approximately US$7.8 million to earn 50% of the Company's rights in the Aljuabarrota-3 concession, comprising approximately 300,000 acres, onshore Portugal. Closing of the agreement is subject to customary conditions including the receipt of all regulatory and government approvals.
"We are excited about our new partnership with Galp to test the pre-salt in the Aljubarrota concession," said Joseph P. Ash, President and CEO of Porto Energy Corp. "We continue to advance our joint venturing strategy thanks to our large working interest in each of our concessions, and the highly attractive prospects uncovered by our 3D seismic campaign. This venture will test a feature that was assigned approximately 100 million barrels of oil equivalent unrisked prospective resources in our March 31, 2012 resource update from Netherland, Sewell & Associates, Inc."
Under the terms of the Agreement the Company intends to drill a pre-salt well, the Alcobaça #1, in the Alubarrota-3 concession with total expected well costs of approximately US$7.0 million. The well has a target depth of approximately 3,000 meters, with drilling expected to commence in late August and take approximately 45-55 days to complete. Under the terms of the Agreement, Galp will acquire a 50% participating interest in exchange for payment of 50% of Porto's sunk costs in the Aljubarrota-3 concession totaling approximately US$4.3 million and payment of their participating interest share (50%) of costs from and after the effective date of the Agreement.
Following the drilling and testing of the Alcobaça #1, Galp has the option to acquire a 25% working interest in each of the Company's other concessions in exchange for payments totaling no more than 25% of Porto's sunk costs in each concession. The Company will remain the operator through the drilling of the Alcobaça #1 well, after which Galp will have the option to become the concession operator.
The Company has finalized negotiations with KCA Deutag to secure the rig currently stacked at Porto's facilities following the expiration of the initial drilling contract between the parties. Under the negotiated terms, Porto is securing the rig on a single well basis at this time with an option on subsequent wells. The Company anticipates signing the final agreement next week. Porto has begun well site construction and plans to mobilize the rig to the well site following signature of a drilling rig contract.
"This agreement allows us to move forward with our plan to test the pre-salt potential in our Aljubarrota concession and we are targeting a late August 2012 spud for the well," said Mr. Ash. "This second partnership indicates the high degree of interest we are generating in our prospective plays and we continue to build momentum with these types of initiatives, especially in the pre-salt which remains a primary and compelling target for us. It also underlines our commitment to bringing in industry partners to increase working capital, while mitigating the dilution to our shareholders, with an emphasis on long-term commitments with well-known groups in the region."
About Porto Energy Corp.
Porto Energy Corp. is an international oil and gas company engaged in the exploration of crude oil and natural gas in Portugal, including the appraisal of a gas discovery. Through its wholly owned subsidiary, Mohave Oil And Gas Corporation (a Texas corporation with branch offices in Portugal), the Company holds working interests in seven concessions in Portugal's Lusitanian Basin totaling approximately 1.9 million net acres. Through its exploration efforts to date, the Company has identified seven major exploration trends over its concessions including unconventional oil and gas resource plays as well as conventional oil and gas targets. Porto Energy's shares trade on the TSX Venture Exchange under the ticker symbol "PEC". For more information on Porto Energy visit www.portoenergy.com.
No proved, probable or possible reserves have been assigned by the Company at this time. Undiscovered resources are those quantities of oil and gas estimated on a given date to be contained in accumulations yet to be discovered. Estimates of resources always involve uncertainty, and the degree of uncertainty can vary widely between accumulations/projects and over the life of a project. There is no certainty that it will be commercially viable to produce any portion of the resources.
Estimates with respect to resources that may be developed and produced in the future are often based upon volumetric calculations, probabilistic methods and upon analogy to similar types of resources, rather than upon actual production history. Estimates based on these methods generally are less reliable than those based on actual production history. Subsequent evaluation of the same resources based upon production history will result in variations, which may be material, in the estimated resources. Resource estimates may require revision based on actual production experience.
Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable because of one or more contingencies. The contingent resources shown are contingent upon demonstration of the economic viability of the projects. Commercial flow rate testing and documentation of development plans will provide further evidence of economic viability of these projects. If these contingencies are resolved, some portion of the contingent resources estimated may be reclassified as reserves. There is no certainty that it will be commercially viable to produce any portion of the contingent resources.
Low Estimate is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. Using probabilistic methods, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
Best Estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. Using probabilistic methods, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
High Estimate is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. Using probabilistic methods, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
Barrels of Oil Equivalent ("BOE's") may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
This press release contains certain 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", "plan", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "predict" and "potential" and similar expressions are intended to identify forward-looking statements. 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. No assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. These forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements that are contained in this press release, except in accordance with applicable securities laws.
Neither 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.
For further information:
Heath Cleaver - Chief Financial Officer
Email: [email protected]