PERTH, Australia – Nido Petroleum Ltd. (ASX: NDO) has entered into a farm-out agreement with Dragon Oil plc, on Service Contract 63 (SC 63) in northwest Palawan basin, Philippines. SC 63 includes the Baragatan-1 exploration well.
Under the agreement, the farm-out will be completed as a two-stage process, with Dragon Oil initially acquiring a 40% participating interest in SC 63 from Nido’s current 50% participating interest.
The second stage of the farm-out is subject to certain conditions and Philippine government approvals to allow PNOC–Exploration Corp. (PNOC-EC) to divest a proportion of its participating interest in SC 63.
Assuming that the conditions are satisfied and approvals are secured for the second stage, Nido will seek to secure an additional net 10% participating interest in SC 63 from PNOC-EC on the same terms agreed between Nido and Dragon Oil. Nido will then have a 20% working interest in SC 63 and will contribute $2 million toward the cost of the Baragatan well (based on the $25 million dry hole cost cap).
During the Baragatan-1 drilling operations, Nido will remain as technical operator and PNOC-EC as operator of the service contract. In this period, Dragon Oil will second personnel to the drilling team and will be responsible for overall drilling management. Following the drilling of the Baragatan-1 well Dragon Oil will have the right to become operator of the service contract.
Drilling of the Baragatan-1 exploration well is expected in 1H 2014.