Source: Nido Petroleum
Nido Petroleum (ASX: NDO) has entered into an agreement with Shell (NYSE:RDS-A) (NYSE:RDS-B) to farm-out 27% out of its current 60% participating interest in the highly prospective Service Contract 54 Block B (SC 54B) in the Northwest Palawan Basin, Philippines.
Nido has now commenced detailed drilling planning, including the ordering of long-lead items and materials, to allow the Gindara prospect to be drilled during the March to May 2011 drilling window.
The drillship Frontier Phoenix has been identified for potential use on the Gindara-1 exploration well, and Nido will remain operator for the drilling of the Gindara-1 well.
Gindara lies approximately 50km immediately south of the Shell operated Malampaya gas field in SC38, the largest discovery made in the Philippines to date and currently on production.
Under the terms of the Farm-in Agreement, Shell will acquire a 45% participating interest in SC 54B with Nido contributing 27% and SC 54B partner Kairiki Energy Limited contributing 18% of their respective participating interests.
To earn its participating interest Shell will contribute 75% of the Gindara-1 exploration well cost up to a maximum well cost of US$24 million; pay $2.5 million towards past seismic costs; and pay its pro-rata share of the 2010 and 2011 Work Program and Budget from the date of signing.
Under the terms of the deal, Nido will remain operator of SC 54B for the drilling of the Gindara-1 exploration well.
On completion of Shell's farm-in, participating interests in SC 54B will be Shell with 45 percent interest, Nido (operator) with 33 percent interest, and Kairiki with 22 percent interest.
The transaction is subject to certain conditions, including joint venture approvals and the approval by the Philippine Department of Energy (DOE) of certain amendments to the Service Contract and the assignment of the relevant participating interest to Shell.
"This arrangement allows Nido to quickly drill Gindara, our leading prospect, and remain focused on maturing exploration drilling plans in SC 58 and SC 63,” Nido's President and CEO, Jocot de Dios, said. “Nido is working to deliver the five well exploration program announced earlier in the year.”