Nido Petroleum Ltd. (ASX: NDO) has entered into a farm-out agreement with Dragon Oil plc, with respect to Service Contract 63 (SC 63) in the northwest Palawan Basin of the Philippines. SC 63 includes the Baragatan-1 exploration well.
Under the terms of 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 being met, which will allow PNOC–Exploration Corp. (PNOC-EC) the opportunity to divest a proportion of its participating interest in SC 63.
Assuming that the relevant conditions are satisfied and approvals are secured for the second stage of the process, 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 SC63 and will then contribute US$2 million toward the cost of the Baragatan well (based on the US$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 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 the first half of 2014.